SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange
Act of 1934 (Amendment No. )
Filed by the Registrant
[X]
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Filed by a Party other than
the Registrant [ ]
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Check the appropriate
box:
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[ ]
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Preliminary Proxy
Statement
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[ ]
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Soliciting Material Under Rule
14a-12
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[ ]
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Confidential, For Use of
the
Commission Only (as permitted
by Rule 14a-6(e)(2))
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[X]
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Definitive Proxy
Statement
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[ ]
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Definitive Additional
Materials
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Consolidated Communications Holdings, Inc.
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(Name of Registrant as
Specified In Its Charter)
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(Name
of Person(s) Filing Proxy Statement, if Other Than the
Registrant)
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Payment of Filing Fee (Check
the appropriate box):
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[X]
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No fee required.
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Fee computed on
table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
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1)
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Title of each class of
securities to which transaction applies:
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2)
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Aggregate number of
securities to which transaction applies:
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3)
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Per unit price or
other underlying value of transaction computed pursuant to Exchange Act
Rule 0-11 (set forth the amount on which the filing fee is calculated and
state how it was determined):
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4)
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Proposed maximum
aggregate value of transaction:
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5)
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Total fee
paid:
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Fee paid previously
with preliminary materials:
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Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its
filing.
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1)
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Amount previously
paid:
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2)
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Form, Schedule or Registration
Statement No.:
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3)
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Filing Party:
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4)
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Date Filed:
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CONSOLIDATED COMMUNICATIONS HOLDINGS,
INC.
NOTICE OF ANNUAL MEETING OF
STOCKHOLDERS
TO BE HELD APRIL 29, 2014
To Our Stockholders:
The 2014 annual
meeting of stockholders of Consolidated Communications Holdings, Inc. will be
held at our corporate headquarters, 121 South 17
th
Street, Mattoon,
IL 61938 on April 29, 2014, at 9:00 a.m., central time. The 2014 annual meeting
of stockholders is being held for the following purposes:
1. To elect Robert J. Currey, C. Robert Udell, Jr. and Maribeth S.
Rahe as Class III directors to serve for a term of three years, in accordance
with our amended and restated certificate of incorporation and amended and
restated bylaws (Proposal No. 1);
2. To ratify the appointment of Ernst & Young LLP as our
independent registered public accounting firm for the fiscal year ending
December 31, 2014 (Proposal No. 2);
3. To conduct an advisory vote on executive compensation (Proposal No.
3); and
4. To transact such other business as may properly come before the
annual meeting and any adjournment or postponement thereof.
Only stockholders of record at the close of business on March 7, 2014 are
entitled to vote at the meeting or at any postponement or adjournment
thereof.
We hope that as many stockholders as possible will personally attend the
meeting. Whether or not you plan to attend the meeting, please complete the
enclosed proxy card and sign, date and return it promptly so that your shares
will be represented. You also may vote your shares by telephone or through the
Internet by following the instructions set forth on the proxy card. Submitting
your proxy in writing, by telephone or through the Internet will not prevent you
from voting in person at the meeting.
By Order of the Board of
Directors,
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Steven J. Shirar
Senior Vice President &
Secretary
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March 26, 2014
Important Notice Regarding the
Availability of Proxy Materials for the Stockholder Meeting to Be Held on April
29, 2014 Our Proxy Statement and 2013 Annual Report to Stockholders are
available at www.edocumentview.com/cnsl.
TABLE OF CONTENTS
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Page
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ABOUT THE
MEETING
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1
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What is the purpose of this proxy statement?
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1
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What proposals will be
voted on at the annual meeting?
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1
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Who is entitled to vote?
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1
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What is the difference
between a stockholder of record and a beneficial holder of
shares?
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2
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Who can attend the meeting?
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2
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What constitutes a
quorum?
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2
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How do I vote?
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2
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Can I change my vote
after I return my proxy card?
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3
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How many votes are required for the proposals to pass?
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3
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How are abstentions and
broker non-votes treated?
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3
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What if I do not specify a choice for a matter when returning a
proxy?
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4
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What are the boards
recommendations?
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4
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What happens if additional matters are presented at the annual
meeting?
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4
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Will anyone contact me
regarding this vote?
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4
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Who will tabulate and certify the vote?
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4
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ANNUAL
REPORT
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4
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Will I receive a copy of Consolidateds 2013 Annual Report to
Stockholders?
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4
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How can I receive a copy
of Consolidateds Annual Report on Form 10-K?
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5
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STOCK OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
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5
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PROPOSAL NO. 1
ELECTION OF ROBERT J. CURREY, C. ROBERT UDELL, JR. AND
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MARIBETH S. RAHE AS
DIRECTORS
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7
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Nominees standing for
election to the board
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7
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Directors continuing to
serve on the board
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7
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Business experience of
nominees to the board
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7
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Business experience of
continuing directors
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8
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Board recommendation and
stockholder vote required
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9
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CORPORATE GOVERNANCE
AND BOARD COMMITTEES
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10
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Are a majority of the
directors independent?
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10
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How are directors
compensated?
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10
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How often did the board
meet during 2013?
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11
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What is the policy
regarding director attendance at annual meetings?
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11
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What is the leadership
structure of the board?
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11
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What committees has the
board established?
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12
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Role of Independent
Compensation Consultant
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14
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-i-
Board oversight of risk
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15
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Stockholder recommendations for director nominations
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16
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Communications with directors
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16
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Code of Business Conduct and Ethics
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REPORT OF THE AUDIT COMMITTEE TO THE
BOARD OF DIRECTORS
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PRINCIPAL INDEPENDENT ACCOUNTANT FEES
AND SERVICES
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Audit Committees Pre-Approval Policies and Procedures
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Principal Accounting Firm Fees
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PROPOSAL NO. 2 RATIFICATION OF
APPOINTMENT OF INDEPENDENT AUDITORS
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Board Recommendation and Stockholder Vote Required
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20
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BUSINESS EXPERIENCE OF EXECUTIVE
OFFICERS
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20
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EQUITY COMPENSATION PLAN
INFORMATION
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COMPENSATION COMMITTEE REPORT
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COMPENSATION DISCUSSION AND
ANALYSIS
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Executive Compensation Objectives
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Processes and Procedures for the Consideration and Determination of
Executive and Director
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Compensation
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Role of Executive Officers, Management and Independent Compensation
Consultant
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25
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Elements of Executive Compensation for 2013
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25
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Employment Security Agreements
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32
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Deductibility of Compensation
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32
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Changes to Compensation Programs for 2014
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33
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EXECUTIVE COMPENSATION
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34
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2013 Summary Compensation Table
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34
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2013 Grants of Plan-Based Awards
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36
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Outstanding Equity Awards at 2013 Fiscal Year-End
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37
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2013 Option Exercises and Stock Vested
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38
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Potential Payments Upon Termination or Change in Control of the
Company
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38
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Termination of Employment Following a Change in Control
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40
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Benefits Upon Change in Control
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40
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PROPOSAL NO. 3 ADVISORY VOTE ON
EXECUTIVE COMPENSATION
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41
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Board Recommendation and Stockholder Vote Required
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41
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CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS
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42
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Related Person Transactions Policy
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42
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SKL Investment Group
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42
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LATEL Sale/Leaseback
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42
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First Mid-Illinois Bancshares, Inc.
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43
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Consolidated Communications, Inc.
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43
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-ii-
COMPENSATION
COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
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43
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ANNUAL REPORT TO STOCKHOLDERS
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43
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STOCKHOLDER PROPOSALS
FOR 2014 ANNUAL MEETING
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44
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GENERAL
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44
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Section 16(a)
Beneficial Ownership Reporting Compliance
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44
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Other Information
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45
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OTHER
MATTERS
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45
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-iii-
CONSOLIDATED COMMUNICATIONS HOLDINGS,
INC.
121 South 17th Street
Mattoon,
Illinois 61938
PROXY STATEMENT
This proxy
statement contains information related to the 2014 annual meeting of
stockholders of Consolidated Communications Holdings, Inc., a Delaware
corporation (the Company, Consolidated, we or us), that will be held at
our corporate headquarters, 121 South 17
th
Street, Mattoon, IL 61938,
April 29, 2014, at 9:00 a.m., central time, and at any postponements or
adjournments thereof. The approximate first date of mailing for this proxy
statement and proxy card, as well as a copy of our combined 2013 annual report
to stockholders and annual report on Form 10-K for the year ended December 31,
2013, is March 26, 2014.
ABOUT THE MEETING
What is the purpose of this proxy
statement?
The purpose of this proxy statement is to provide information regarding
matters to be voted on at the 2014 annual meeting of our stockholders.
Additionally, it contains certain information that the Securities and Exchange
Commission (the SEC) requires us to provide annually to stockholders. The
proxy statement is also the document used by our board to solicit proxies to be
used at the 2014 annual meeting. Proxies are solicited by our board to give all
stockholders of record an opportunity to vote on the matters to be presented at
the annual meeting, even if the stockholders cannot attend the meeting. The
board has designated Steven J. Shirar and Matthew K. Smith as proxies, who will
vote the shares represented by proxies at the annual meeting in the manner
indicated by the proxies.
What proposals will be voted on at the
annual meeting?
Stockholders will vote on the following proposals at the annual
meeting:
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the election of Robert J. Currey, C. Robert Udell,
Jr. and Maribeth S. Rahe as Class III directors to serve
for a term of three years, in accordance with our amended
and restated certificate of incorporation and
amended and restated bylaws (Proposal No. 1);
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the ratification of the appointment of Ernst &
Young LLP as our independent registered public
accounting firm (the independent auditors), for the fiscal year
ending December 31, 2014
(Proposal No.
2);
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an advisory vote on executive compensation
(Proposal No. 3); and
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any other business properly coming before the
annual meeting and any adjournment or
postponement thereof.
Who is entitled to vote?
Each outstanding share of our common stock entitles its holder to cast
one vote on each matter to be voted upon at the annual meeting. Only
stockholders of record at the close of business on the record date, March 7,
2014, are entitled to receive notice of the annual meeting and to vote the
shares of common stock that they held on that date at the meeting, or any
postponement or adjournment of the meeting. If your shares are held for you by a
beneficial holder in street name please
refer to the information forwarded to you by your bank, broker or other holder
of record to see what you must do to vote your shares. Please see the next
question below on this page for a description of a beneficial owner in street
name.
A complete list
of stockholders entitled to vote at the annual meeting will be available for
examination by any stockholder at our corporate headquarters, 121 South 17th
Street, Mattoon, Illinois 61938, during normal business hours for a period of
ten days before the annual meeting and at the time and place of the annual
meeting.
What is the difference between a
stockholder of record and a beneficial holder of shares?
If your shares are registered directly in your name with our transfer
agent, Computershare Trust Company, N.A., you are considered a stockholder of
record with respect to those shares. If this is the case, we have sent or
provided proxy materials directly to you.
If your shares are held in a stock brokerage account or by a bank or
other nominee, you are considered the beneficial holder of the shares held for
you in what is known as street name. If this is the case, the proxy materials
have been forwarded to you by your brokerage firm, bank or other nominee, which
is considered the stockholder of record with respect to these shares. As the
beneficial holder, you have the right to direct your broker, bank or other
nominee how to vote your shares. Please contact your broker, bank, or other
nominee for instructions on how to vote any shares you beneficially
own.
Who can attend the
meeting?
All stockholders of record as of March 7, 2014, or their duly appointed
proxies, may attend the meeting. Cameras, recording devices and other electronic
devices will not be permitted at the meeting. If you hold your shares in street
name, you will need to bring a copy of a brokerage statement reflecting your
stock ownership as of the record date and check in at the registration desk at
the meeting.
What constitutes a
quorum?
A quorum of stockholders is necessary to hold the annual meeting. The
presence at the meeting, in person or by proxy, of the holders of a majority of
the shares of common stock outstanding on the record date will constitute a
quorum. As of March 7, 2014, the record date, 40,256,155 shares of our common
stock were outstanding. Proxies received but marked as withheld, abstentions or
broker non-votes will be included in the calculation of the number of shares
considered present at the meeting for purposes of establishing a quorum. In the
event that a quorum is not present at the annual meeting, we expect that the
annual meeting will be adjourned or postponed to solicit additional
proxies.
How do I vote?
If you are a stockholder of record, you may vote by any of the following
methods:
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Internet
.
Electronically through the Internet by accessing our materials using the
information on your
proxy card. To vote through
the Internet, you should sign on to this website and follow the
procedures
described at the website. Internet
voting is available 24 hours a day, and the procedures are designed
to authenticate votes cast by using a personal
identification number located on your proxy card. These
procedures allow you to give a proxy to vote your shares and
to confirm that your instructions have been properly
recorded. If you vote through the Internet, you should not return your proxy
card. If you vote
through the Internet, your
proxy will be voted as you direct on the website.
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Mail
. By
returning your proxy through the mail. If you complete and properly sign the
accompanying
proxy card and return it to us, it
will be voted as you direct on the proxy card. You should follow the
instructions set forth on the proxy card, being sure
to complete it, to sign it and to mail it in the enclosed
postage-paid envelope.
2
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Telephone
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By calling 1-800-652-8683 (VOTE). This toll free number is also included on
the proxy card.
Telephone voting is available
24 hours a day, and the procedures are designed to authenticate votes
cast
by using a personal identification number
located on your proxy card. These procedures allow you to
give a proxy to vote your shares and to confirm that your
instructions have been properly recorded. If
you vote by telephone, you should not return your proxy card.
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In Person
.
In person at the meeting.
We recommend that
you vote in advance even if you plan to attend the meeting so that we will know
as soon as possible that enough votes will be present for us to hold the
meeting. If you are a stockholder of record and attend the meeting, you may vote
at the meeting or deliver your completed proxy card in person.
If your shares are held in street name, please refer to the information
forwarded to you by your bank, broker or other holder of record to see what you
must do in order to vote your shares, including whether you may be able to vote
electronically through your bank, broker or other record holder. If so,
instructions regarding electronic voting will be provided by the bank, broker or
other holder of record to you as part of the package that includes this proxy
statement. If you are a street name stockholder and you wish to vote in person
at the meeting, you will need to obtain a proxy from the institution that holds
your shares and present it to the inspector of elections with your ballot when
you vote at the annual meeting.
Can I change my vote after I return my
proxy card?
Yes. Even after you have submitted your proxy, you may change your vote
at any time before the proxy is voted by:
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delivering to our Secretary at the address on the
first page of this proxy statement a written notice of
revocation of your proxy by mail, by telephone or through the
Internet;
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delivering a duly executed proxy bearing a later
date; or
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voting in person at the annual meeting.
If your shares are held in street name, you may vote in person at the
annual meeting if you obtain a proxy as described in the answer to the previous
question.
How many votes are required for the
proposals to pass?
Election of Directors (Proposal No. 1).
Directors are elected by a plurality vote. Accordingly, the three
director nominees who receive the greatest number of votes cast will be
elected.
Ratification of the Appointment of Ernst & Young LLP (Proposal
No. 2), Approval of Executive Compensation in the Advisory Vote (Proposal No.
3), and Approval of any Other Proposals.
The
vote required for the ratification of the appointment of Ernst & Young LLP,
the approval of executive compensation in the advisory vote and the approval of
any other proposal not presently anticipated that may properly come before the
annual meeting or any adjournment or postponement of the meeting is the approval
of a majority of the votes present, in person or by proxy, and entitled to vote
on the matter.
How are abstentions and broker
non-votes treated?
With respect to Proposal No. 1, abstentions will have no effect. If a
stockholder abstains from voting on Proposal No. 2 or Proposal No. 3, it will
have the same effect as a vote AGAINST that proposal. Broker non-votes and
shares as to which proxy authority has been withheld with respect to any matter
are not entitled to vote for purposes of determining whether stockholder
approval for that matter has been obtained and, therefore, will have no effect
on the outcome of the vote on any such matter. A broker non-vote occurs on a
proposal when shares held of record by a broker are present or represented at
the meeting but the broker is not permitted to vote on that proposal without
instruction from the beneficial owner of the shares and no instruction has been
given.
3
What if I do not specify a choice for a
matter when returning a proxy?
Stockholders
should specify their choice for each matter on the enclosed proxy. If no
specific instructions are given, proxies that are signed and returned will be
voted:
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FOR the election of Robert J. Currey, C. Robert
Udell, Jr. and Maribeth S. Rahe as Class III directors
(see page 7);
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FOR the proposal to ratify the appointment of
Ernst & Young LLP as our independent auditors
(see page 20); and
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FOR the proposal to approve executive
compensation for the Companys named executive officers
(see page 41).
What are the boards
recommendations?
The boards recommendations, together with the description of each
proposal, are set forth in this proxy statement. In summary, the board
recommends that you vote:
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FOR the election of Robert J. Currey, C. Robert
Udell, Jr., and Maribeth S. Rahe as Class III directors
(see page 7);
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FOR the ratification of the appointment of Ernst
& Young LLP as our independent auditors
(see page 20); and
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FOR the approval of the compensation of the
Companys named executive officers (see page 41).
Unless you give other instructions on your proxy card, the persons named
as proxy holders on the enclosed proxy card will vote in accordance with the
recommendations of the board of directors.
What happens if additional matters are
presented at the annual meeting?
Other than the three proposals described in this proxy statement, we are
not aware of any other business to be acted upon at the annual meeting. If you
grant a proxy, the persons named as proxy holders on the enclosed proxy card
will vote your shares on any additional matters properly presented for a vote at
the meeting as recommended by the board or, if no recommendation is given, in
their own discretion.
Pursuant to the provisions of Rule 14a-4(c) under the Securities Exchange
Act of 1934, as amended (the Exchange Act), with respect to any other matter
that properly comes before the meeting, the proxy holders will vote as
recommended by the board of directors or, if no recommendation is given, in
their own discretion.
Will anyone contact me regarding this
vote?
No arrangements or contracts have been made or entered into with any
solicitors as of the date of this proxy statement, although we reserve the right
to engage solicitors if we deem them necessary. If done, such solicitations may
be made by mail, telephone, facsimile, e-mail, the Internet or personal
interviews.
Who will tabulate and certify the
vote?
Representatives of Computershare Trust Company, N.A., our transfer agent,
will tabulate the votes and act as Inspector of Elections.
ANNUAL REPORT
Will I receive a copy of Consolidateds
2013 Annual Report to Stockholders?
We have enclosed our 2013 annual report to stockholders for the fiscal
year ended December 31, 2013 with this proxy statement. The annual report
includes our audited financial statements, along with other financial
information about us, which we urge you to read carefully.
4
How can I receive a copy of
Consolidateds Annual Report on Form 10-K?
Our annual report
on Form 10-K for the fiscal year ended December 31, 2013, as filed with the SEC
on March 5, 2014, is included in the 2013 annual report to stockholders, which
accompanies this proxy statement.
You can also obtain, free of charge, a copy of our annual report on Form
10-K, including all exhibits filed with it, by:
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accessing the investor relations section of our
website at
http://ir.consolidated.com
and clicking on the Financial
Information link followed by clicking on the SEC Filings link;
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accessing the materials online at
www.edocumentview.com/cnsl
;
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writing to:
Consolidated Communications Holdings, Inc. Investor
Relations
121 South 17th
Street
Mattoon, Illinois 61938; or
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telephoning us at: (217) 258-2959.
You can also obtain a copy of our annual report on Form 10-K and other
periodic filings that we make with the SEC from the SECs EDGAR database
at http://www.sec.gov
.
STOCK OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth certain information that has been provided
to us with respect to the beneficial ownership of shares of our common stock for
(i) each stockholder who is known by us to own beneficially more than 5.0% of
the outstanding shares of our common stock, (ii) each of our directors, (iii)
each of our executive officers named in the Summary Compensation Table on page
34, and (iv) all of our directors and executive officers as a group. Unless
otherwise indicated, each stockholder shown on the table has sole voting and
investment power with respect to all shares shown as beneficially owned by that
stockholder. Unless otherwise indicated this information is current as of March
7, 2014, and the address of all individuals listed in the table is as follows:
Consolidated Communications Holdings, Inc., 121 South 17th Street, Mattoon,
Illinois 61938-3987.
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Aggregate Number of
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Shares Beneficially
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Percentage of
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Name of Beneficial Owner
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Owned
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Shares
Outstanding
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BlackRock, Inc.
(a)
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2,898,392
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7.2
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%
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The Vanguard Group, Inc. (b)
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2,554,079
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6.3
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%
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City National
Rochdale LLC (c)
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2,441,615
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6.1
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%
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Lumpkin, Richard Anthony (d)
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2,097,575
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5.2
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%
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Robert J.
Currey
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150,486
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*
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C. Robert Udell, Jr.
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72,711
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*
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Steven L.
Childers
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90,293
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*
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Steven J. Shirar
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98,266
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*
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Chris A.
Young
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65,835
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*
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Thomas A. Gerke
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6,807
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*
|
|
|
Maribeth S.
Rahe
|
|
|
33,297
|
|
|
|
*
|
|
|
Timothy D. Taron
|
|
|
21,847
|
|
|
|
*
|
|
|
Roger H.
Moore
|
|
|
25,864
|
|
|
|
*
|
|
|
All directors & officers as a group
(10 persons)
|
|
|
|
|
|
|
6.6
|
%
|
|
*
|
Less than 1.0%
ownership.
|
5
(a)
|
|
Beneficial and percentage
ownership information is based on information contained in a Form 13G/A
filed with the SEC on January 28, 2014 by BlackRock, Inc. The address of
BlackRock, Inc. is 40 East 52nd Street, New York, New York
10022.
|
|
(b)
|
|
Beneficial and percentage
ownership information is based on information contained in a Form 13G/A
filed with the SEC on February 12, 2014 by The Vanguard Group, Inc. The
address of The Vanguard Group, Inc. is Vanguard Blvd., Malvern,
Pennsylvania 19355.
|
|
(c)
|
|
Beneficial and percentage
ownership information is based on information contained in a Form 13F
filed with the SEC on December 31, 2013 by City National Rochdale LLC. The
address of City National Rochdale LLC is 570 Lexington Avenue, New York,
New York 10022.
|
|
(d)
|
|
Includes: (i) 481,154 shares
owned by Living Trust FBO Richard A. Lumpkin, (ii) 15,000 shares owned by
1970 Trust FBO Richard A. Lumpkin, (iii) 3,500 shares owned by Mr.
Lumpkins wife, (iv) 106,153 shares owned by the Benjamin I. Lumpkin 2012
Irrevocable Trust, for which Mr. Lumpkin is the trustee, and (v) 1,491,768
shares owned by Central Illinois Telephone, LLC (Central Illinois
Telephone). The equity interests in Central Illinois Telephone are owned
by SKL Investment Group, LLC, a Delaware limited liability company (SKL
Investment Group). Richard A. Lumpkin and members of his family own all
of the equity interests in SKL Investment Group. Mr. Lumpkin is the sole
manager of the SKL Investment Group fund that owns Central Illinois
Telephone and he has the sole power to direct the voting and disposition
of its investments. Mr. Lumpkin is also the sole manager of Central
Illinois Telephone and has the sole investment and voting power with
respect to the shares of common stock held by Central Illinois Telephone.
As a result of the above, Mr. Lumpkin may be deemed to have beneficial
ownership of the shares owned by Central Illinois Telephone. He disclaims
this beneficial ownership except to the extent of his pecuniary interest
in those securities.
|
6
PROPOSAL NO. 1 ELECTION OF ROBERT J.
CURREY, C. ROBERT UDELL, JR. AND
MARIBETH S. RAHE AS DIRECTORS
Our amended and
restated certificate of incorporation provides for the classification of our
board of directors into three classes of directors, designated Class I, Class II
and Class III, as nearly equal in size as is practicable, serving staggered
three-year terms. One class of directors is elected each year to hold office for
a three-year term or until successors of such directors are duly elected and
qualified. The corporate governance committee has recommended, and the board
also recommends, that the stockholders elect Mr. Currey, Mr. Udell and Ms. Rahe,
the nominees designated below as the Class III directors, at this years annual
meeting to serve for a term of three years expiring in 2017 or until his or her
respective successor is duly elected and qualified. The nominees for election to
the position of Class III directors, and certain information with respect to
their backgrounds and the backgrounds of non-nominee directors, are set forth
below.
It is the intention of the persons named in the accompanying proxy card,
unless otherwise instructed, to vote to elect the nominees named herein as the
Class III directors. The nominees named herein presently serve on our board of
directors, and each nominee has consented to serve as a director if elected at
this years annual meeting. In the event that any of the nominees named herein
is unable to serve as a director, discretionary authority is reserved to the
board to vote for a substitute for such nominee. The board has no reason to
believe that the nominees named herein will be unable to serve if
elected.
Nominees standing for election to the
board
Name
|
|
|
Age
|
|
Current Position With Consolidated
|
|
Robert J. Currey
|
|
|
|
|
(Class III Director
term expiring in 2017)
|
|
68
|
|
Chairman of the Board, Chief Executive Officer and
Director
|
Maribeth S.
Rahe
|
|
|
|
|
(Class III Director
term expiring in 2017)
|
|
65
|
|
Director
|
C. Robert Udell, Jr.
|
|
|
|
|
(Class III Director
term expiring in 2017)
|
|
48
|
|
President, Chief Operating Officer and Director
|
|
|
|
|
|
Directors
continuing to serve on the board
|
|
|
|
|
|
|
|
|
|
Name
|
|
|
Age
|
|
Current Position With Consolidated
|
|
Richard A. Lumpkin
|
|
|
|
|
(Class I Director term
expiring in 2015)
|
|
79
|
|
Founding Director
|
Timothy D.
Taron
|
|
|
|
|
(Class I Director term
expiring in 2015)
|
|
63
|
|
Director
|
Roger H. Moore
|
|
|
|
|
(Class II Director
term expiring in 2016)
|
|
72
|
|
Director
|
Thomas A.
Gerke
|
|
|
|
|
(Class II Director
term expiring in 2016)
|
|
57
|
|
Director
|
Set forth below is information with respect to the nominees to the board
and each continuing director regarding their experience. After the caption
Board Contributions, we describe some of the specific experience,
qualifications, attributes or skills that led to the conclusion that the person
should serve as a director for the Company.
Business experience of nominees to the
board
Robert J. Currey
serves as our Chairman and Chief Executive Officer. Mr. Currey has served as one
of the Companys directors and as a director of our predecessors since 2002 and
as our Chief Executive Officer since 2002. From 2002 to November 2013, he served
as our President. From 2000 to 2002, Mr. Currey served as Vice Chairman of RCN
Corporation, a competitive telephone company providing telephony, cable and
Internet services in high-density markets nationwide. From 1998 to 2000, Mr.
Currey served as President and Chief Executive Officer of 21st Century Telecom
Group. From 1997 to 1998, Mr. Currey served as Director and Group President of
Telecommunications Services of McLeodUSA, which acquired our predecessor in
1997. Mr. Currey joined our
7
predecessor in 1990 and served as
President through its acquisition in 1997. Mr. Currey is also a director of The
Management Network Group, Inc. (a professional services company), the USTelecom
Association and the Illinois Business RoundTable.
Mr. Currey was
employed by RCN Corporation from 2000 to 2002. In May 2004, RCN filed a plan of
reorganization through a Chapter 11 bankruptcy petition on a voluntary
basis.
Board Contributions
:
Mr. Currey
is a long-time industry veteran and has significant experience leading other
companies in the telecommunications and media sector. He is well known
throughout the telecommunications industry and is respected as an opinion leader
especially among the mid-sized telecom carriers. Because of his experience and
his role as Chief Executive Officer, Mr. Currey also has substantial
institutional knowledge regarding the Company, including its operations and
strategies.
C. Robert Udell, Jr.
serves as our President, Chief Operating Officer and a director. Mr.
Udell has served as Chief Operating Officer since May 2011 and has served as
President since November 2013. He has served as a director since November 2013.
From 1999 to 2004, Mr. Udell served in various capacities at the predecessor of
our Texas operations, including Executive Vice President and Chief Operating
Officer. From 2004 to November 2013, Mr. Udell served as Senior Vice President.
Prior to joining the predecessor of our Texas operations in March 1999, Mr.
Udell was employed by our predecessor from 1993 to 1999 in a variety of senior
roles, including Senior Vice President, Network Operations, and Engineering. Mr.
Udell is a member of the USTelecom Association Advisory Committee. He serves on
the boards of the Katy Economic Development Council, Greater Conroe Economic
Development Council, and the Montgomery County United Way and Board of trustees
for The John Cooper School.
Board Contributions
:
Mr. Udell
has been in the telecommunications industry for a number of years, and has
worked in a number of capacities. He brings a broad knowledge of our operating
environment, key trends in technology and regulation, and market forces
impacting the Company. By dint of his role as President of the Company, he is
also able to provide the board with in-depth insight into the Companys current
performance and future plans.
Maribeth S. Rahe
has served as a director since July 2005. Ms. Rahe has served as President and
Chief Executive Officer of Fort Washington Investment Advisors, Inc. since
November 2003. Ms. Rahe is currently a member of the board of directors of First
Financial Bancorp and First Financial Bank. From January 2001 to October 2002,
Ms. Rahe was President and a member of the board of directors of U.S. Trust
Company of New York, and from June 1997 to January 2001, was its Vice Chairman
and a member of the board of directors.
Board Contributions
:
Ms. Rahe has
deep background as a senior executive in the banking industry and is well
attuned to developments in the capital markets and their potential impact on the
Company. She provides a strong risk-management perspective and oversees the
Boards succession planning efforts. She also qualifies as an audit committee
financial expert under SEC guidelines.
Business experience of continuing
directors
Richard A. Lumpkin
has served as a director with us and our predecessor since 2002 and as
Chairman of the Board from 2005 until November 2013, at which time the board
designated him a Founding Director. From 1997 to 2002, Mr. Lumpkin served as
Vice Chairman of McLeodUSA, which acquired our predecessor in 1997. From 1963 to
1997, Mr. Lumpkin served in various positions at our predecessor, including
Chairman, Chief Executive Officer, President and Treasurer. Mr. Lumpkin is
currently a director of Agracel, Inc., a real estate investment company and is
Treasurer and formerly a Trustee of The Lumpkin Family Foundation. Mr. Lumpkin
is also a former director, former President and former Treasurer of the
USTelecom Association, a former president of the Illinois Telecommunications
Association, a former director of First Mid-Illinois Bancshares, Inc. (First
Mid-Illinois), a financial services holding company and a former director of
Ameren Corp., a public utility holding company. Mr. Lumpkin has also served on
the University Council Committee on Information Technology for Yale
University.
Board Contributions
:
Mr. Lumpkin
is a long-time telecommunications industry veteran, has long experience in the
executive leadership of the Company and its predecessor and is a significant
stockholder in the Company. He is well known and respected by other industry
participants and enjoys access to, and a long-standing relationship
8
with, the senior executives, ownership,
and board members of many public and private telecommunications companies with
whom the Company considers its relationships to be important. By virtue of his
significant ownership, Mr. Lumpkin represents a strong voice for stockholders in
the Boards deliberations.
Roger H. Moore
has served as a director since July 2005. Mr. Moore was President and Chief
Executive Officer of Illuminet Holdings, Inc., a provider of network, database
and billing services to the communications industry, from October 1998 to
December 2001, a member of its board of directors from July 1998 to December
2001, and its President and Chief Executive Officer from January 1996 to August
1998. In December of 2001, Illuminet was acquired by VeriSign, Inc. and Mr.
Moore retired at that time. In September 1998 and October 1998, he served as
President, Chief Executive Officer and a member of the board of directors of
VINA Technologies, Inc., a telecommunications equipment company. From June 2007
to November 2007 Mr. Moore served as interim President and CEO of Arbinet. From
December 2007 to May 2009, Mr. Moore served as a consultant to VeriSign
Corporation. Mr. Moore also presently serves as a director of VeriSign, Inc. and
Western Digital Corporation.
Board Contributions
:
Mr.
Moore is a seasoned telecommunications executive with a deep background in the
industry and very strong technical aptitude. He has a strong entrepreneurial
bent and is a knowledgeable analyst of the evolution of telecommunications and
the impact of new technologies on our business. He brings perspective from
service on other boards. He also qualifies as an audit committee financial
expert under SEC guidelines.
Thomas A. Gerke
has served as a director since February 2013 and is the Chief Legal Officer at
H&R Block, the worlds largest consumer tax services provider, since January
2012. From January 2011 to April 2011, Mr. Gerke served as Executive Vice
President, General Counsel and Secretary of YRC Worldwide, a Fortune 500
transportation service provider. From July 2009 to December 2010, Mr. Gerke
served as Executive Vice Chairman of CenturyLink, a Fortune 500 integrated
communications business. From December 2007 to June 2009, he served as President
and Chief Executive Officer at Embarq, then a Fortune 500 integrated
communications business. He also held the position of Executive Vice President
and General Counsel Law and External Affairs at Embarq from May 2006 to
December 2007. From October 1994 through May 2006, Mr. Gerke held a number of
executive and legal positions with Sprint, serving as Executive Vice President
and General Counsel for over two years. Mr. Gerke is also a former director of
the CenturyLink, Embarq and United States Telecom Association and has served on
the Rockhurst University Board of Trustees.
Board Contributions
: Mr.
Gerke has substantial experience in the telecommunications sector. His
leadership and industry experiences bring a strong and knowledgeable operational
and strategic perspective to the Boards deliberations. He also brings
perspective from service on other boards. Although Mr. Gerke is not currently a
member of our audit committee, he also qualifies as an audit committee
financial expert under SEC guidelines.
Timothy D. Taron
has served as director of since July 2012. Mr. Taron, a practicing attorney for
over 30 years, served on the board of directors of SureWest Communications
(SureWest) from 2000 until the consummation of the Companys merger with
SureWest on July 2, 2012. Since 1981, Mr. Taron has been a senior partner with
the law firm of Hefner Stark & Marois, LLP, Attorneys-at-Law, Sacramento,
California. He was formerly the President and director of the Sacramento
Metropolitan Chamber of Commerce, a private, nonprofit organization.
Board Contributions
:
Mr. Taron, a practicing attorney for over 30 years with a firm located in our
Sacramento market, specializes in complex business transactions, real estate
development and tax-exempt bond financing, providing the board with the ability
to analyze a variety of business matters. His extensive involvement in the
Sacramento business community, coupled with his hands-on experience in areas
affecting the growth and health of the economy in the community he resides and
practices law, provides the board with better insight into the markets the
Company principally serves and its potential business opportunities. Mr. Taron
is well suited for the Governance committee chair position due to his past
involvement on public and non-profit boards and his training and continuing
education as an attorney.
Board recommendation and stockholder
vote required
The board of directors recommends a vote FOR the election of
the nominees named above (Proposal No. 1 on the accompanying proxy
card).
The affirmative vote of a
plurality of the votes cast at the meeting at which a quorum is present is
required for the election of each nominee named above.
9
CORPORATE GOVERNANCE AND BOARD
COMMITTEES
Are a majority of the directors
independent?
Yes. The
corporate governance committee undertook its annual review of director
independence and reviewed its findings with the board of directors. During this
review, the board of directors considered relationships and transactions between
each director or any member of his or her immediate family and Consolidated and
its subsidiaries and affiliates, including those reported under Certain
Relationships and Related Transactions below. The board of directors also
examined relationships and transactions between directors or their affiliates
and members of our senior management. The purpose of this review was to
determine whether any such transactions or relationships compromised a
directors independence.
The board also considered the relationship between the Company and
H&R Block, a company that purchases telecommunications services from the
Company in the ordinary course of business, because Mr. Gerke is an officer of
H&R Block. The Company received $91,486 in payments from H&R Block in
2013 from 28 separate H&R Block locations. Similarly, the board also
considered the relationship between the Company and the law firm of Hefner Stark
& Marois, LLP, a company that also purchases telecommunications services
form the Company in the ordinary course of business, because Mr. Taron is a
partner with Hefner, Stark, & Marois. The Company received $12,684 in
payments from Hefner Stark & Marois, LLP in 2013. The board concluded that
since most of the services provided by the Company to H&R Block and Hefner
Stark & Marois, LLP are offered pursuant to state and federal tariffs, and
that all such purchases were made on customary business terms, these
relationships were not material for purposes of the NASDAQ listing standards and
would not influence Mr. Gerkes nor Mr. Tarons actions or decisions as
directors of the Company.
As a result of this review, our board of directors affirmatively
determined that Messrs. Gerke, Moore and Taron and Ms. Rahe are independent for
purposes of Rule 5605(a)(2) of The NASDAQ Stock Market LLCs (NASDAQ)
Marketplace Rules. The board also determined that each member of the audit
committee, Messrs. Moore and Taron and Ms. Rahe, satisfy the heightened
standards of independence for audit committee members set forth in Rule
10A-3(b)(1) of the Exchange Act. Additionally, the board determined that each
member of the compensation committee, Messrs. Gerke and Moore and Ms. Rahe,
satisfy the heightened standards of independence for compensation committee
members pursuant to Rule 5605(d)(2)(A) of the NASDAQ Marketplace
Rules.
How are directors
compensated?
The director compensation described below is based on a study conducted
by Towers Watson, the outside consultant engaged by the compensation committee
in late 2012, following the Companys acquisition of SureWest Communications, to
complete a benchmark study. The outside consultant developed a peer group of 16
companies, which are similar in size and scope to the Company, and with whom we
compete for investors. For more information regarding the consultant and our
peer group, see Compensation Discussion and Analysis Executive Compensation
Objectives.
Directors receive the following compensation: (1) $25,000 annual cash
retainer; (2) $1,250 for board meetings attended in person and $750 for
committee meetings attended in person, with meeting fees halved for each board
or board committee meeting attended by means of telephone conference call; (3)
$15,000 additional annual cash retainer for the chairperson of the audit
committee; and (4) $10,000 additional annual cash retainer for the chairperson
of each of the compensation committee and the corporate governance committee. We
reimburse all non-employee directors for reasonable expenses incurred to attend
board or board committee meetings. In addition, a restricted share award of
3,615 shares was made to each of the independent directors in March 2013
pursuant to the Amended and Restated Consolidated Communications Holdings, Inc.
2005 Long-Term Incentive Plan. In March 2013, the Company modified its director
compensation program such that the annual restricted share awards are determined
by using a value of $61,000, which is an increase from the previous $45,000
amount.
Accordingly, the number of shares granted to the independent Directors
was determined by dividing $61,000 by the 20-day average closing price of the
stock as of two trading days before the award date. One hundred percent (100%)
of such shares vested on December 5, 2013.
10
Mr. Lumpkin, who
served as Chairman of the Board until November 2013, Mr. Udell, who also serves
as President, and Mr. Currey, our Chairman of the Board since November 2013 and
current Chief Executive Officer, did not receive any additional compensation for
their service on the board in 2013. Mr. Curreys and Mr. Udells compensation is
set forth in the Summary Compensation Table. Mr. Lumpkin is not a named
executive officer.
The table below discloses all compensation provided to each non-employee
director of the Company in 2013.
|
|
Fees Earned
|
|
Stock
|
|
|
|
|
|
|
|
or Paid
|
|
Awards
|
|
Total
|
Name
|
|
in Cash ($)
|
|
($)(1)
|
|
($)
|
Roger H.
Moore
|
|
|
$
|
47,500
|
|
|
|
|
$
|
61,925
|
|
|
|
$
|
109,425
|
|
Maribeth S. Rahe
|
|
|
$
|
53,500
|
|
|
|
|
$
|
61,925
|
|
|
|
$
|
115,425
|
|
Timothy D.
Taron
|
|
|
$
|
48,500
|
|
|
|
|
$
|
61,925
|
|
|
|
$
|
110,425
|
|
Thomas A. Gerke
|
|
|
$
|
63,125
|
(2)
|
|
|
|
$
|
61,925
|
|
|
|
$
|
125,050
|
|
(1)
|
|
Stock Awards
. The
amounts in this column represent the grant date fair value of the
restricted share award made on March 12, 2013, computed in accordance with
Financial Accounting Standards Board Statement Accounting Standards
Codification Topic 718. Also see Footnote 8 to the Consolidated Financial
Statements contained in the Companys Annual Report on Form 10-K for the
year ended December 31, 2013 for an explanation of the assumptions made by
the Company in the valuation of these awards. At December 31, 2013, Ms.
Rahe had 552 restricted shares outstanding, and Mr. Moore had 552
restricted shares outstanding.
|
|
(2)
|
|
Fees Earned or Paid in Cash Thomas A.
Gerke
. Our directors retainer fees are
customarily paid in November of each year, for the following years
service. In early 2013, Mr. Gerke was elected to our board. His fees paid
in 2013 therefore included his initial retainer for 2013 service, and his
retainer for 2014 service.
|
How often did the board meet during
2013?
The board met
five times during calendar 2013. Each director attended at least 75% of the
board meetings and meetings of board committees on which they served. During
2013, the independent directors held four meetings at which only independent
directors were present in connection with regularly scheduled meetings of the
board or committees of the board.
What is the policy regarding director
attendance at annual meetings?
Absent special circumstances, each director is expected to attend the
annual meeting of stockholders. All of the Companys directors attended the 2013
annual meeting of stockholders.
What is the leadership structure of the
board?
In consultation with the corporate governance committee, the board
reviews the leadership structure of the board from time to time in order to
ensure that the boards leadership structure is optimal for the board at the
current time. Until November 2013, the board had separated the Chairmans role
from the Chief Executive Officers role. When Mr. Currey became Chairman of the
Board in November 2013, the board determined that it would be in the best
interests of the Company if he retained the Chief Executive Officer title as
well. Accordingly, Mr. Currey currently serves as both our Chairman and Chief
Executive Officer. The board believes that this is currently in the best
interests of the Company because Mr. Currey is a long-time industry veteran and
has relationships with other industry participants and the various regulatory
and public policy bodies with whom the Company must interact. By serving as both
Chairman and Chief Executive Officer, Mr. Currey is able to bring this knowledge
to bear as he works with Mr. Udell, our newly-elected President, in the daily
decision making and long term strategy development for the Company. This
structure also provides continuity of leadership and a respectful climate of
informed and open dialogue, debate, and decision making on topics important to
the Company and its stockholders. The board does not have a lead independent
director, but each of the boards committees is composed solely of independent
directors. The board will continue to review the leadership structure of the
board from time to time and will appoint a lead independent director or separate
the roles of Chairman and Chief Executive Officer if it determines that doing so
would be in the best interests of the Company.
11
What committees has the board
established?
The board has
standing audit, corporate governance and compensation committees. The membership
of the standing committees was as of December 31, 2013, and currently is, as
follows:
|
|
|
|
Corporate
|
|
|
|
|
Audit
|
|
Governance
|
|
Compensation
|
Name
|
|
Committee
|
|
Committee
|
|
Committee
|
Roger H.
Moore
|
|
*
|
|
|
|
Chairperson
|
Maribeth S. Rahe
|
|
Chairperson
|
|
|
|
*
|
Timothy D.
Taron
|
|
*
|
|
Chairperson
|
|
|
Thomas A. Gerke
|
|
|
|
*
|
|
*
|
____________________
*
indicates member
Audit Committee.
The audit
committee consists of Messrs. Moore and Taron and Ms. Rahe, who serves as the
Chairperson. The board has determined that all members of the audit committee
are independent for purposes of Rule 5605(a)(2) of NASDAQs Marketplace Rules
and Rule 10A-3(b)(1) of the Exchange Act. The board has also determined that in
addition to being independent, each of Mr. Moore and Ms. Rahe is an audit
committee financial expert as such term is defined under the applicable SEC
rules and is presumed to be financially sophisticated for purposes of Rule
5605(c)(2)(A) of NASDAQs Marketplace Rules.
The audit committee met four times during 2013. The board has adopted an
audit committee charter, which may be found by accessing the investor relations
section of our website at
http://ir.consolidated.com
and
clicking on the Corporate Governance link.
The principal duties and responsibilities of the audit committee are to
assist the board in its oversight of:
-
the integrity of our financial statements and
reporting process;
-
our compliance with legal and regulatory
matters;
-
the independent auditors qualifications and
independence;
-
general oversight of risk management of the
Company, including reviewing risks and exposures relating to financial
reporting, particularly disclosure and SEC reporting, disclosure controls,
internal control over financial reporting, accounting, internal and
independent auditors, financial policies, and tax, investment, credit and
liquidity matters; and
-
the performance of our independent
auditors.
Our audit committee is also responsible for the following:
-
conducting an annual performance evaluation of the
audit committee;
-
compensating, retaining, and overseeing the work
of our independent auditors;
-
establishing procedures for (a) receipt and
treatment of complaints on accounting and other related matters and (b)
submission of confidential employee concerns regarding questionable accounting
or auditing matters;
-
reviewing and overseeing all related party
transactions required to be disclosed in our proxy statement pursuant to our
Related Person Transactions Policy, which we describe beginning on page 42;
and
-
preparing reports to be included in our public
filings with the SEC.
12
The audit
committee has the power to investigate any matter brought to its attention
within the scope of its duties. It also has the authority to retain counsel and
advisors to fulfill its responsibilities and duties. See the Report of the
Audit Committee of the Board of Directors on page 18.
Corporate Governance Committee.
The corporate governance committee consists of Messrs. Gerke and Taron, who
serves as the Chairperson. The board has determined that each of Mr. Gerke and
Mr. Taron are independent for purposes of Rule 5605(a)(2) of NASDAQs
Marketplace Rules.
The corporate governance committee met three times during 2013. The board
has adopted a corporate governance committee charter, a copy of which may be
found by accessing the investor relations section of our website at
http://ir.consolidated.com
and clicking on the Corporate Governance link.
The principal duties and responsibilities of the corporate governance
committee are as follows:
-
to identify individuals qualified to become
directors and to select, or recommend that the board select, director
nominees;
-
to develop and recommend to the board the content
of our corporate governance principles, a copy of which may be found by
accessing the investor relations section of our website at
http://ir.consolidated.com
and clicking on the Corporate Governance link;
-
to review with management and, as the corporate
governance deems useful, consultants or legal counsel, the areas of material
risk to the corporation relating to (i) management continuity and succession
planning, (ii) board and board committee selection, composition, evaluation,
continuity and succession planning, (iii) directors and officers liability
insurance, and (iv) other corporate governance matters; and
-
to oversee the evaluation of our board and
management team.
In evaluating candidates for directorships, our board, with the
assistance of the corporate governance committee, will take into account a
variety of factors it considers appropriate, which may include strength of
character and leadership skills; general business acumen and experience; broad
knowledge of the telecommunications industry; knowledge of strategy, finance,
internal business and relations between telecommunications companies and
government; age; number of other board seats; and willingness to commit the
necessary time to ensure an active board whose members work well together and
possess the collective knowledge and expertise required by the board. We have
not previously paid a fee to any third party in consideration for assistance in
identifying potential nominees for the board. While the board has not adopted a
specific policy regarding diversity, it believes the diverse backgrounds and
perspectives of its current directors, as described above for each nominee and
current director under the heading Board Contributions, are well suited to the
oversight of the Companys management team, its business plans, and
performance.
Compensation Committee.
The
compensation committee consists of Mr. Moore, who serves as its Chairperson, Ms.
Rahe and Mr. Gerke. The board has determined that each of Mr. Moore, Ms. Rahe
and Mr. Gerke is independent for purposes of Rule 5605(a)(2) of NASDAQs
Marketplace Rules and satisfies the heightened standards of independence for
compensation committee members pursuant to Rule 5605(d)(2)(A) of NASDAQs
Marketplace Rules.
The compensation committee met four times during 2013. The board has
adopted a compensation committee charter, a copy of which may also be found by
accessing the investor relations section of our website at
http://ir.consolidated.com
and clicking on the Corporate Governance link.
The principal duties and responsibilities of the compensation committee
are as follows:
-
to review and approve goals and objectives
relating to the compensation of our Chief Executive Officer and, based upon a
performance evaluation, to determine and approve the compensation of the Chief
Executive Officer and other senior officers;
13
-
to review compensation risk to determine whether
compensation policies and practices for employees are reasonably likely to
have a material adverse effect on the Company, including whether the design or
operation of the Companys compensation programs encourage employees to engage
in excessive risk-taking, is aligned to the interests of stockholders,
promotes effective leadership and leadership development and appropriately
awards pay for performance;
-
to approve the grant of long term incentive awards
Company-wide and recommend amendments to the Companys executive compensation
programs to the board for approval;
-
to review and recommend to the board of directors,
or approve, new executive compensation programs, based on its periodic review
of the operations of the Companys executive compensation programs to
determine whether they are properly coordinated and achieving their intended
purpose;
-
to establish and periodically review policies in
the area of senior management perquisites;
-
to make recommendations to our board on incentive
compensation and equity-based plans; and
-
to prepare reports on executive compensation to be
included in our public filings with the SEC.
Additional information on the compensation
committees processes and procedures for the consideration and determination of
executive and director compensation are addressed in the Compensation
Discussion and Analysis Processes and Procedures for the Consideration and
Determination of Executive and Director Compensation section of this proxy
statement.
Role of Independent Compensation
Consultant
The compensation committee has directly
engaged Towers Watson as its outside consultant to assist it in reviewing the
effectiveness and competitiveness of the Companys executive compensation and
outside director programs and policies. Pursuant to its charter and NASDAQ
listing standards, the compensation committee regularly reviews the independence
of Towers Watson relative to key factors, including whether:
-
Towers Watson provides any other services to the
Company;
-
the amount of fees paid to Towers Watson relative
to the total revenue of the firm;
-
policies in place to prevent conflicts of
interest;
-
any personal or business relationships with
members of the compensation committee;
-
ownership of Company stock; and
-
any personal or business relationships with
executive officers.
The Company paid Towers Watson $39,347 for
services provided to the compensation committee in 2013 and $72,310 in 2012.
Towers Watson also provided pension actuarial services and individual employee
pension benefit calculations support to the Company during 2013 for which the
Company paid Towers Watson $291,335. The decision to engage Towers Watson for
these other services was made by the pension committee of management. This is a
long-standing relationship pre-dating the Companys initial public offering of
stock whereby Towers Watson performs ad hoc issue analysis as requested from
time-to-time by management, and neither the compensation committee nor the board
approved such other services.
In particular, Towers Watson assisted the
compensation committee with the following in 2013, with a view toward
compensation decisions for 2014:
-
construction of the benchmark group companies to
be used in compensation analysis;
-
analysis of the Companys total direct
compensation, including base salary, annual bonus, and long-term
incentives;
14
-
review and consulting on compensation design and
performance linkage;
-
advising the Company on certain changes in its
compensation programs pursuant to the realignment of roles in which Mr. Currey
became Chairman of the Board and Mr. Udell became President and a
director;
-
evaluation of the compensation program for the
Companys non-executive senior management team, including total direct
compensation and Employment Security Agreements relative to broad market
and
telecom industry trends, as described
below; and
-
ad hoc issue analysis as requested by the
compensation committee.
Towers Watsons
work in 2013 consisted principally of performing analysis and providing
recommendations concerning the compensation programs for the Companys senior
management personnel, including:
-
evaluation and benchmarking certain of the
Companys senior management jobs relative to the peer group and to broad
marketplace trends;
-
review of the non-executive senior management
change-in-control agreements;
-
analysis of total direct compensation programs
including salary, bonus, and long term incentives; and
-
evaluation and recommendations concerning the
type, amount, and frequency of long term incentive compensation to be offered
to the non-executive senior management personnel going forward.
Board oversight of risk
The Companys board of directors has responsibility for general oversight
of risk management of the Company and has delegated oversight of certain risks,
as appropriate, to the audit committee, the compensation committee and the
corporate governance committee, as further described below. As set forth in the
Audit Committee Charter, the audit committee reviews with management and, to the
extent the audit committee deems it appropriate, with the Companys independent
auditors or counsel to the Company, compliance with laws and regulations, major
pending litigation, and risks and exposures relating to financial reporting,
particularly disclosure and SEC reporting, disclosure controls, internal control
over financial reporting, accounting, internal and independent auditors,
financial policies, and tax, investment, credit and liquidity
matters.
The compensation committee reviews executive compensation risk to
determine whether compensation policies and practices for its employees are
reasonably likely to have a material adverse effect on the Company, including
whether the design or operation of the Companys executive compensation program
encourages executives to engage in excessive risk-taking, is aligned to the
interests of stockholders, and appropriately awards pay for performance. In
doing so the compensation committee reviews the overall program design, as well
as the balance between short-term and long-term compensation, the metrics used
to measure performance and the award opportunities under the Companys incentive
compensation program, and the implementation of other administrative features
designed to mitigate risk such as vesting requirements. In February 2014 the
Compensation Committee reviewed the company compensation policies and practices
and determined that these programs are not reasonably likely to have a material
adverse effect on the Company.
The corporate governance committee reviews with management and, as the
corporate governance committee deems useful, consultants or legal counsel, the
areas of material risk to the Company relating to (i) management continuity and
succession planning, (ii) board and board committee continuity and succession,
(iii) directors and officers liability insurance, and (iv) other corporate
governance matters. These matters are reviewed in meetings in which, except for
executive session portions, management directors participate with all of the
Companys independent directors, and can be the subject of discussion at board
meetings as well.
Management has an active Enterprise Risk Management (ERM) steering
committee in place which includes the Chairman of the Board and Chief Executive
Officer, President and Chief Operating Officer, and Chief Financial Officer and
other key executives and a representative from the Companys outside counsel.
The Chief Financial Officer, as Committee Chairman, is the primary liaison
between management and the board regarding
15
the ERM implementation and process. The
steering committee has responsibility for the implementation and oversight of
the ongoing ERM process including identifying, prioritizing, and assigning
ownership of key risks. The management team has primary responsibility for
monitoring and managing these key risks which could affect the Companys
operating and financial performance. ERM is a standing agenda item on the
quarterly board meeting agenda. At least annually, upon reviewing and
establishing the financial and operating targets for the next fiscal year, the
management team reviews with the full board the key risks facing the Company
during the upcoming year and the plans the Company has put in place to mitigate
those risks.
Stockholder recommendations for
director nominations
As noted above, the corporate governance
committee considers and establishes procedures regarding recommendations for
nomination to the board, including nominations submitted by stockholders. Recommendations
of stockholders should be timely sent to us, either in person or by certified
mail, to the attention of the Secretary, Consolidated Communications Holdings,
Inc., 121 South 17th Street, Mattoon, Illinois 61938-3987. Any recommendations
submitted to the Secretary should be in writing and should include whatever
supporting material the stockholder considers appropriate in support of that
recommendation, but must include the information that would be required to be
disclosed under the SECs rules in a proxy statement soliciting proxies for the
election of such candidate and a signed consent of the candidate to serve as our
director if elected. The corporate governance committee will evaluate all
potential candidates in the same manner, regardless of the source of the
recommendation. Based on the information provided to the corporate governance
committee, it will make an initial determination whether to conduct a full
evaluation of a candidate. As part of the full evaluation process, the corporate
governance committee may, among other things, conduct interviews, obtain
additional background information and conduct reference checks of the candidate.
The corporate governance committee may also ask the candidate to meet with
management and other members of the board.
Communications with
directors
Stockholders interested in communicating directly with the board or the
independent directors may do so by writing to the Secretary, Consolidated
Communications Holdings, Inc., 121 South 17th Street, Mattoon, Illinois
61938-3987. The Secretary will review all such correspondence and forward to the
board or the independent directors a summary of that correspondence and copies
of any correspondence that, in his opinion, deals with functions of the board or
that he otherwise determines requires their attention. Any director or any
independent director may at any time review a log of all correspondence received
by the Company that is addressed to members of the board or independent
directors and request copies of such correspondence. Any concerns relating to
accounting, internal controls or auditing matters will be brought to the
attention of the audit committee and handled in accordance with the procedures
established by the audit committee with respect to such matters.
Code of Business Conduct and
Ethics
The board has adopted a Code of Business Conduct and Ethics (the Code),
a copy of which may be found by accessing the investor relations section of our
website at
http://ir.consolidated.com
and
clicking on the Corporate Governance link. Under the Code, we insist on honest
and ethical conduct by all of our directors, officers, employees and other
representatives, including the following:
-
Our directors, officers and employees are required
to deal honestly and fairly with our customers,
collaborators, competitors and other third parties.
-
Our directors, officers and employees should not
be involved in any activity that creates or gives the
appearance of a conflict of interest between their personal interests
and the interests of Consolidated.
-
Our directors, officers and employees should not
disclose any of our confidential information or the
confidential information of our suppliers, customers or other business
partners.
We are also committed to providing our stockholders and investors with
full, fair, accurate, timely and understandable disclosure in the documents that
we file with the SEC. Further, we will comply with all laws, rules and
regulations that are applicable to our activities and expect all of our
directors, officers and employers to obey the law.
16
Our board of
directors and audit committee have established the standards of business conduct
contained in this Code and oversee compliance with this Code. Training on this
Code is included in the orientation of new employees and has been provided to
existing directors, officers and employees.
If it is determined that one of our directors, officers or employees has
violated the Code, we will take appropriate action including, but not limited
to, disciplinary action, up to and including termination of employment. If it is
determined that a non-employee (including any contractor, subcontractor or other
agent) has violated the Code, we will take appropriate corrective action, which
could include severing the contractor, subcontractor or agency
relationship.
17
REPORT OF THE AUDIT COMMITTEE TO THE
BOARD OF DIRECTORS
The audit
committee is made up solely of independent directors, as defined in the
applicable NASDAQ and SEC rules, and it operates under a written charter, dated
February 28, 2011, which is available by accessing the investor relations
section of our website at
http://ir.consolidated.com
. The
charter of the audit committee specifies that the purpose of the audit committee
is to assist the Board in fulfilling its oversight responsibility
for:
-
the quality and integrity of the companys
financial statements;
-
the companys compliance with legal and regulatory
requirements;
-
the independent auditors qualifications and
independence; and
-
the performance of the companys independent
auditors.
In carrying out these responsibilities, the audit committee, among other
things, supervises the relationship between the Company and its independent
auditors including making decisions with respect to their appointment or
removal, reviewing the scope of their audit services, pre-approving audit
engagement fees and non-audit services and evaluating their independence. The
audit committee oversees and evaluates the adequacy and effectiveness of the
Companys systems of internal and disclosure controls and internal audit
function. The audit committee has the authority to investigate any matter
brought to its attention and may engage outside counsel for such
purpose.
The Companys management is responsible, among other things, for
preparing the financial statements and for the overall financial reporting
process, including the Companys system of internal controls. The independent
auditors responsibilities include (i) auditing the financial statements and
expressing an opinion on the conformity of the audited financial statements with
U.S. generally accepted accounting principles and (ii) auditing the financial
statements and expressing an opinion on managements assessment of, and the
effective operation of, the Companys internal control over financial
reporting.
The audit committee met four times during fiscal year 2013. The audit
committee schedules its meetings with a view to ensuring that it devotes
appropriate attention to all of its tasks. The audit committees meetings
include executive sessions with the Companys independent auditor and, at least
quarterly and at other times as necessary, sessions without the presence of the
Companys management.
As part of its oversight of the Companys financial statements, the audit
committee reviewed and discussed with management and Ernst & Young LLP, the
Companys independent auditor, the audited financial statements of the Company
for the fiscal year ended December 31, 2013. The audit committee discussed with
Ernst & Young LLP, such matters as are required to be discussed by Public
Company Accounting Oversight Board Auditing Standard No. 16,
Communications with the Audit Committee
, relating to the conduct of the audit. The audit committee
also has discussed with Ernst & Young LLP, the auditors independence from
the Company and its management, including the matters in the written disclosures
and the letter the audit committee received from the independent auditor as
required by applicable requirements of the Public Company Accounting Oversight
Board regarding the independent accountants communications with the audit
committee concerning independence, and discussed with the independent auditor
the independent auditors independence.
Based on its review and discussions referred to above, the audit
committee has recommended to the board of directors that the audited financial
statements be included in the Companys Annual Report on Form 10-K for the
fiscal year ended December 31, 2013, for filing with Securities and Exchange
Commission. The audit committee has also selected Ernst & Young LLP as the
Companys independent auditors for 2014.
|
MEMBERS OF THE AUDIT
COMMITTEE
|
|
|
|
Maribeth S. Rahe,
Chairperson
|
|
Roger H.
Moore
|
|
Timothy D.
Taron
|
18
PRINCIPAL INDEPENDENT ACCOUNTANT FEES
AND SERVICES
Audit Committees Pre-Approval Policies
and Procedures
In accordance
with the requirements of the Sarbanes-Oxley Act of 2002 and the Audit Committee
Charter, all audit and audit-related work performed by the independent public
registered accounting firm, Ernst & Young LLP, must be submitted to the
audit committee for specific approval in advance by the audit committee,
including the proposed fees for such work. The audit committee has not delegated
any of its responsibilities under the Sarbanes-Oxley Act to
management.
Principal Accounting Firm
Fees
Fees (including reimbursement for out-of-pocket expenses) paid to our
independent registered public accounting firm for services in 2013 and 2012 were
as follows:
|
|
|
|
|
|
Audit
|
|
|
|
|
|
|
All
|
|
Audit
|
|
Related
|
|
|
|
|
|
|
Other
|
|
Fees
|
|
Fees
|
|
Tax Fees
|
|
Fees
|
|
(In
millions)
|
2013
|
|
$
|
1.6
|
|
|
|
$
|
0.0
|
|
|
|
$
|
0.4
|
|
|
|
$
|
0.0
|
|
2012
|
|
$
|
2.0
|
|
|
|
$
|
1.0
|
|
|
|
$
|
0.3
|
|
|
|
$
|
0.0
|
|
Audit Fees
include fees billed for professional services rendered by Ernst & Young LLP
for the audit of our consolidated financial statements for fiscal 2013 and 2012,
including the audit of internal controls over financial reporting under
Sarbanes-Oxley Act of 2002.
For fiscal 2013, there were no Audit-Related Fees. The Audit Related Fees
rendered by Ernst & Young LLP during fiscal 2012 were primarily related to
diligence work on acquisitions and work related to registrations statements. Tax
Fees include fees billed for professional services rendered by Ernst & Young
LLP related to tax consulting and tax compliance services.
For fiscal 2013, no Audit-Related Fees, Tax Fees or All Other Fees
disclosed above were approved in reliance on the exceptions to the pre-approval
process set forth in 17 CFR 210.2-01(c)(7)(i)(C).
19
PROPOSAL NO. 2 RATIFICATION OF
APPOINTMENT OF INDEPENDENT AUDITORS
The audit
committee of the board of directors has appointed Ernst & Young LLP as our
independent auditors for the year ending December 31, 2014. Our stockholders are
being asked to ratify this appointment at the annual meeting. Ernst & Young
LLP has served as our auditors since December 31, 2002, when Homebase
Acquisition, LLC, one of our predecessors, acquired our Illinois operations from
McLeodUSA.
Board Recommendation and Stockholder
Vote Required
The board of directors recommends a vote FOR the ratification
of the appointment of Ernst & Young LLP as our independent auditors for the
year ending December 31, 2014 (Proposal No. 2 on the proxy
card).
The affirmative vote of the holders of a majority of the votes
represented at the annual meeting in person or by proxy will be required for
approval. Representatives of Ernst & Young LLP, expected to be present at
the 2014 annual meeting, will have the opportunity to make a statement at the
meeting if they desire to do so and are expected to be available to respond to
appropriate questions.
If the appointment is not ratified, the audit committee will reconsider
the appointment.
BUSINESS EXPERIENCE OF EXECUTIVE
OFFICERS
The following is a description of the background of our continuing
executive officers who are not directors:
Steven L. Childers
, age 58, serves as our Senior Vice President & Chief Financial
Officer. Mr. Childers has served in this position since April 2004. From April
2003 to April 2004, Mr. Childers served as Vice President of Finance. From
January 2003 to April 2003, Mr. Childers served as the Director of Corporate
Development. From 1997 to 2002, Mr. Childers served in various capacities at
McLeodUSA, including as Vice President of Customer Service and, a Vice President
of Sales as a member of its Business Process Teams, leading an effort to
implement new revenue assurance processes and controls. Mr. Childers joined our
predecessor in 1986 and served in various capacities through its acquisition by
McLeodUSA in 1997, including as President of its former Market Response division
and in various finance and executive roles. Mr. Childers is a director of the
Illinois State Chamber of Commerce Board and is currently serving as Treasurer
and recently completed a six-year term on the Board of Directors of the Eastern
Illinois University Foundation, including serving as President for three
years.
Steven J. Shirar
, age 55, serves as our Senior Vice President and Corporate Secretary.
Mr. Shirar has served as our Secretary since February 2006 and has served as
Senior Vice President since 2003. From 1997 to 2002, Mr. Shirar served in
various capacities at McLeodUSA, progressing from Chief Marketing Officer to
Chief Sales and Marketing Officer. From 1996 to 1997, Mr. Shirar served as
President of the predecessor the Companys then existing software development
subsidiary, Consolidated Communications Systems and Services, Inc.
Christopher A. Young
, age 58, serves as our Chief Information Officer. Mr. Young has served
in this position since 2003. From 2000 to 2003, Mr. Young served as Chief
Information Officer of NewSouth Communications, Inc., a broadband communications
provider. From 1998 to 2000, Mr. Young served as Chief Information Officer for
21st Century Telecom Group.
20
EQUITY COMPENSATION PLAN
INFORMATION
Immediately prior
to the closing of our initial public offering in July 2005, our stockholders
approved the 2005 Long-Term Incentive Plan, which was effective upon completion
of our initial public offering. At the 2009 annual meeting of stockholders, the
stockholders approved the Amended and Restated Consolidated Communications
Holdings, Inc. 2005 Long-Term Incentive Plan (the LTIP). At the 2010 annual
meeting of stockholders, stockholders approved an amendment to the LTIP
increasing the number of shares available under the LTIP.
The following table sets forth information regarding the LTIP, the
Companys only equity compensation plan, as of December 31, 2013:
|
|
|
|
|
|
Number of
Securities
|
|
|
|
|
|
|
Remaining
Available
|
|
|
|
|
|
|
for Future
Issuance
|
|
|
Number of Securities
to
|
|
|
|
Under
Equity
|
|
|
be Issued
Upon
|
|
Weighted-Average
Exercise
|
|
Compensation
Plans
|
|
|
Exercise of
Outstanding
|
|
Price of
Outstanding
|
|
(Excluding
Securities
|
|
|
Options, Warrants
and
|
|
Options, Warrants
and
|
|
Reflected in
Column
|
|
|
Rights
|
|
Rights
|
|
(a))
|
Plan Category
|
|
(a)
|
|
(b)
|
|
(c)(1)
|
Equity compensation
plans approved by
|
|
|
|
|
|
|
security
holders
|
|
|
|
|
|
771,737
|
Equity compensation plans not approved
by
|
|
|
|
|
|
|
security holders
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
771,737
|
____________________
(1)
|
|
771,737 shares remain
available for future issuance under the LTIP as described
above.
|
21
COMPENSATION COMMITTEE
REPORT
The compensation
committee of the board of directors has furnished the following report to the
stockholders of the Company in accordance with rules adopted by the Securities
and Exchange Commission.
The compensation committee reviewed and discussed with management the
Companys Compensation Discussion and Analysis contained in this Proxy
Statement.
Based upon the review and discussions referred to above, the compensation
committee recommended to the board of directors that the Companys Compensation
Discussion and Analysis be included in this Proxy Statement.
The information in this report is not soliciting material, is not
deemed filed with the SEC and is not to be incorporated by reference in any of
our filings under the Securities Act of 1933, as amended, or the Exchange Act,
whether made before or after the date hereof and irrespective of any general
incorporation language in any such filings.
This report is submitted on behalf of the members of the compensation
committee:
|
Roger H. Moore,
Chairperson
|
|
Maribeth S.
Rahe
|
|
Thomas A.
Gerke
|
22
COMPENSATION DISCUSSION AND
ANALYSIS
Executive Compensation
Objectives
The compensation
committee has designed the Companys executive compensation program to achieve
the following objectives:
-
provide incentives to company executives to
maximize stockholder return;
-
enable the company to attract, and retain
talented, results-oriented managers capable of leading key areas
of the Companys business; and
-
reward the management team for achieving key
financial and operational objectives which will promote
the long-term health of the business.
Each key element of total compensation serves a specific purpose that
helps achieve the objectives of the executive compensation program.
The three key elements of the current executive compensation program are
annual base salary, cash bonuses, and long-term, equity-based incentives. The
Company also provides its executive officers with severance and
change-in-control benefits as well as a limited number of perquisites and other
personal benefits. Our discussion below, under the caption Elements of
Executive Compensation contains an explanation of each of these elements. In
evaluating the mix of these compensation components, as well as the short-term
and long-term value of the executive compensation plans, the compensation
committee considers both the performance and skills of each executive, as well
as the compensation paid to those in similar organizations with similar
responsibilities.
The following discussion explains how the compensation committee uses the
three key compensation elements to meet the objectives of its executive
compensation program.
Objective #1:
Provide incentives to Company executives to
maximize stockholder return.
The
compensation committee uses both time-based and performance-based restricted
shares in an effort to unify the interests of the Companys executives and
stockholders.
The Company granted restricted shares to its Chief Executive Officer, Mr.
Currey, in March, 2013, which vest over a two-year period beginning at the end
of the year of the award. Each of the other named executive officers also
received a time-based restricted-share award in 2013, with a vesting period of
approximately four years. The compensation committee believes that granting
restricted shares that vest based on performance, then incrementally over time,
but only so long as an executive remains employed by the Company, encourages an
executive to increase the Companys stock value over time so the executive can
realize a greater value of those shares once they vest.
The compensation committee also granted performance shares to all of its
executives in March 2012, pursuant to which restricted shares were awarded in
March 2013 based on the attainment of certain performance goals for 2012; and
granted performance shares to all executive officers in March 2013, pursuant to
which restricted shares were awarded in March 2014 based on the attainment of
certain performance goals for 2013.
Objective #2:
Enable the Company to attract and retain
talented, results-oriented managers capable of leading key areas of the
Companys business.
In order to assist the
compensation committee in setting compensation levels, the compensation
committee has obtained from time to time from Towers Watson, its outside
consultant, information regarding compensation paid by the Companys peer group,
as defined below.
In the fourth quarter of 2012, following the completion of its
acquisition of SureWest Communications, and the subsequent restructuring of its
executive team, the Company engaged Towers Watson to do a full benchmark study,
in which a new benchmark group was constructed, and the Companys executive
compensation program was compared to the 50
th
percentile of the
benchmark group. This study formed the basis for executive compensation
decisions. Under direction of the compensation committee, Towers Watson
conducted a custom survey of compensation paid by the following companies (our
peer group) that, at the time of the study, operated in the integrated
communications, wireless telecommunications, communications equipment and
broadcasting and cable
23
television industries and that had annual
revenues ranging from $200 million to $1.5 billion, with a median revenue of
$599 million (in line with the Companys 2013 full year revenue of approximately
$602 million as reported on Form 10-K filed on March 5, 2014).
|
Alaska Communications Systems
|
|
|
Primus
Telecommunications
|
|
|
Cogent Communications
|
|
Group, Inc.
|
|
|
Group, Inc.
|
|
|
Group, Inc.
|
|
Ntelos Holdings Corp.
|
|
|
Knology, Inc.
|
|
|
USA Mobility, Inc.
|
|
Fairpoint Communications,
Inc.
|
|
|
Clearwire Corporation Corp.
|
|
|
Cincinnati Bell Inc.
|
|
Lumos Networks Corp
|
|
|
SBA Communications C
|
|
|
General Communications
Inc.
|
|
TW telecom inc. (f/k/a Time
|
|
|
Atlantic Telenetwork, Inc.
|
|
|
Cbeyond, Inc.
|
|
Warner Telecom, Inc.)
|
|
|
|
|
|
|
|
Shenandoah Telecommunications
|
|
|
|
|
|
|
|
Company
|
|
|
|
|
|
|
The compensation
committee selected these companies because the Company competes with them for
executive talent, and because these companies also compete with the Company for
investors.
This information provided guidance for decisions regarding various
elements of the Companys executive compensation program for 2013,
including:
-
levels of salary, annual bonus, long-term
incentives and total direct compensation;
-
percentage of total compensation that is cash and
percentage that is equity;
-
percentage of total compensation that is current
and percentage that is long-term;
-
types and features of equity-based compensation
awards;
-
amounts and types of perquisites and other
personal benefits; and
-
components of potential change-in-control
benefits.
In general, the Companys compensation structure encourages executives to
remain with the Company by paying annual cash bonuses, which motivates
executives to remain employed through the year, and by granting restricted
shares and performance shares, which require a long-term commitment to the
Company since executives must generally remain employees for at least four years
(in the case of restricted shares) or five years (in the case of performance
shares) in order to realize the full value of the shares when they
vest.
Objective #3:
Reward the management team for achieving key
financial and operational objectives which will promote the long-term health of
the business.
The Companys cash incentive
bonus plan ties the level of achievement of the Companys annual financial and
operational performance goals to the amount of annual incentive compensation
that we pay to each of our executives. In addition, the Company makes annual
Long Term Incentive Plan (or LTIP) awards in the form of performance shares
which are only earned when performance criteria are met. This provides a strong
linkage between the number of restricted shares ultimately awarded and the
Companys achievement of its performance goals. As a result, a significant
portion of each executives total compensation is dependent on the degree to
which we achieve these performance goals. This provides an incentive for the
Companys executives to increase performance with respect to these measures, and
in turn increase stockholder value.
Processes and Procedures for the
Consideration and Determination of Executive and Director
Compensation
The board of directors approves and establishes the annual operating and
performance goals for the Company, and the compensation committee then
determines the appropriate criteria for linking compensation of the named
executive officers and the non-employee directors to this performance, including
the establishment of:
-
base salary amounts for the Companys executive
officers;
-
annual incentive programs for the Companys
executive officers;
24
-
long-term equity incentive compensation and all
policies related to the issuance of restricted shares and
performance shares by the Company, including grants of
restricted shares to directors;
-
annual performance goals and payouts for the
Company under the bonus plan and the Companys long-term incentive plan; and
-
amounts of the annual retainers and other fees for
the Companys non-employee directors.
Role of Executive Officers, Management
and Independent Compensation Consultant
The compensation
committee conducts an annual review of the Chief Executive Officers
performance, and reviews it with the board of directors. The Chief Executive
Officer prepares a performance review for each of the other executives for each
completed calendar year. Based on his assessment of each individuals
performance during the preceding calendar year, as well as a review of how each
executives compensation compares with the peer group companies, the Chief
Executive Officer recommends to the compensation committee, for each such
executive, base salary amounts, time-based and performance share awards and
annual performance goals under the bonus plan and the long-term incentive
plan.
Please see the caption Corporate Governance and Board Committees Role
of Independent Compensation Consultant on page 14 for an explanation of the
role of the compensations outside consultant, Towers Watson.
Elements of Executive Compensation for
2013
The key elements of the compensation committees executive compensation
program for 2013 were:
-
an annual base salary;
-
cash bonuses directly linked to achievement of the
Companys annual financial and operational
performance goals; and
-
(i) the continued vesting of previously awarded
time-vesting restricted shares for all named executive
officers; (ii) a grant of performance-based restricted shares for all
of our executive officers; and (iii) a
grant of
time-based restricted shares for all of our executive officers.
In addition, the Company provides severance and change-in-control
benefits, as well as a limited number of perquisites and other personal benefits
to all of its executive officers.
For 2013, as in prior years, the compensation committee determined that
each of the named executive officers should receive an annual base salary and
also be eligible for a cash bonus opportunity. The compensation committee set
performance-based targets for restricted shares to be awarded to all named
executive officers if certain performance goals were met.
In general, the compensation committee reviews executive compensation and
executive performance on an annual basis, in the first quarter, following the
completion of the previous performance year. For 2013 performance, the review
took place in February 2014.
Salary
The Company pays all of its executive officers an annual salary, which
the compensation committee believes provides financial stability for executives
and reflects their level of responsibility with the Company. The compensation
committee also believes that that salary increases should reward an individuals
contributions to the Company.
25
The compensation committee reviews, and
may revise at its discretion, salaries for executive officers when it feels
those changes are warranted. In its annual review of the salaries of executive
officers for 2013, and in addition to the general increase warranted by the
updated benchmark study, the committee considered the following principal
factors:
-
performance of the executive during the previous
year, including that individuals contribution to the
Companys attainment of its pre-established performance
goals;
-
achievement by the Company during the previous
year of its performance goals; and
-
salary levels of comparable positions at companies
in the Companys peer group.
For 2013, based
on the Towers Watson benchmarking study, the compensation committee determined
that, in the aggregate, the total targeted compensation for the Companys named
executive officers was approximately 44% below the 50
th
percentile of
the peer group. The primary reasons for this lag (which increased from 15% below
the then benchmark companies as of January 1, 2010) were the decisions to defer
compensation increases for the past several years due to (i) the overall
challenging market conditions and the desire to contain costs during these
periods of economic uncertainty and (ii) the decision to wait until after the
Companys 2012 acquisition of SureWest Communications and the completion of the
benchmark study once the transaction closed.
Considering that it is the Companys stated policy to target its
executive compensation programs at the 50
th
percentile of market, and
in further view of the fact that the executive officers individual and
collective performance was deemed to have met or exceeded expectations in 2013,
the compensation committee determined to grant compensation increases to each of
its named executive officers as a first step in a planned multi-year transition
to move toward the 50
th
percentile of the peer group.
The compensation committee made changes in the named executive officers
compensation, effective January 1 2013, to increase each of their base salaries
(or base), cash bonus payment opportunities (short term incentive or STI)
and long-term, incentive based incentive compensation opportunities (or
LTI).
Mr. Curreys base salary for 2013 was increased from $370,000 to
$425,000. Mr. Udells base salary for 2013 was increased from $250,000 to
$294,000. Mr. Childers base salary for 2013 was increased from $222,000 to
$251,000. Mr. Shirars base salary for 2013 was increased from $222,000 to
$239,000. Mr. Youngs base salary for 2013 was increased from $196,000 to
$230,000.
In the aggregate, the percentage increases for each element of total
direct compensation for each of the Companys named executive officers, assuming
payouts at the applicable target levels, is outlined in the table
below:
|
|
Percent Increases to:
|
|
Name
|
|
|
Base Salary
|
|
STI
|
|
LTI
|
|
Total
|
Robert J. Currey
|
|
|
15
|
%
|
|
|
|
11
|
%
|
|
|
|
25
|
%
|
|
|
|
18
|
%
|
|
C. Robert Udell,
Jr.
|
|
|
18
|
%
|
|
|
|
29
|
%
|
|
|
|
22
|
%
|
|
|
|
22
|
%
|
|
Steven L. Childers
|
|
|
13
|
%
|
|
|
|
45
|
%
|
|
|
|
20
|
%
|
|
|
|
22
|
%
|
|
Steven J.
Shirar
|
|
|
8
|
%
|
|
|
|
45
|
%
|
|
|
|
4
|
%
|
|
|
|
14
|
%
|
|
Christopher A. Young
|
|
|
17
|
%
|
|
|
|
23
|
%
|
|
|
|
0
|
%
|
|
|
|
12
|
%
|
|
In addition to these changes, the compensation committee determined that
the grant of time-based restricted shares, performance-based restricted shares,
as described on page 31, and the continued vesting of previously-granted
time-based restricted shares would provide a means to aid in retention of the
Companys executive team and keep their interests aligned with the Companys
stockholders.
26
Cash Bonuses
The Company
maintains a cash incentive bonus plan that is designed to reward achievement of
annual Company performance goals. The compensation committee believes that
consistent attainment of these goals is critical to the Companys long-term
success. In 2013, each of the named executive officers was eligible to
participate in the bonus plan, which provided them with the opportunity to earn
a cash bonus payment. The payment was measured as a percentage of the named
executive officers salary and was based on the achievement of criteria
established by the compensation committee.
For the named executive officers, other than the Chief Executive Officer
(the other named executives), the compensation committee based its performance
targets on the following measures and in the following amounts:
-
50% on the Companys adjusted earnings before
interest, taxes, depreciation and amortization (adjusted
EBITDA) for 2013 (target of $279.0
million);
-
20% on dividend payout ratio for 2013 (target of
69.9% or less);
-
15% on broadband subscriber net additions for 2013
(target of 15,300 net additions), which consisted
of the number of the Companys subscribers to its digital subscriber
lines (DSL) and Internet protocol
television
(IPTV) lines;
-
15% on a set of nine related other operating
goals which the compensation committee set for the
Companys executive team to meet as a group. These other operating
goals contain a mix of qualitative
and
quantitative goals which are established by the compensation committee to
guide the management
team in achieving the
companys operating, strategic, and public policy goals. The goals are the
same
for all the other named executives, and
the achievement score is determined by the compensation
committee, based on the Chief Executive Officers
recommendation, as a part its annual evaluation of
the other named executives performance as a team. For 2013 these
other operating goals included,
among other
items, specific goals related to the Companys planned capital expenditures
and network
development, quality of service
metrics, successful integration of SureWest Communications into the
Companys operations, advancement of the Companys
interests in the regulatory and public policy
arena, fine-tuning of the Companys capital structure,
product-development initiatives and corporate
development/business development.
The performance
measure categories and weightings for 2013 were generally the same as those used
in 2012, with the exception that:
-
Video profitability was dropped as a discrete
performance metric for 2013; and
-
Weighting on broadband net subscriber additions
increased from 7.5% to 15%.
The compensation committee believes these changes were appropriate since
(a) EBITDA, which is already the dominant component of cash flow generation and
the heaviest weighted performance metric in the payout formula, by its nature
incorporates video profitability; and (b) broadband subscriber net additions are
a key element in the Companys growth strategy. As described above under the
caption Role of Executive Officers, Management and Independent Compensation
Consultant, the Chief Executive Officer prepares a performance review for each
of the other executives for each completed calendar year. This includes his
assessment of each other named executive officers performance during the
preceding calendar year with respect to the level of attainment of the other
operating goals. The Chief Executive Officer recommended, and the compensation
committee approved, an attainment level of 8.5 out of 9 with respect to the
other operating goals for 2013.
27
For the Chief
Executive Officer, the compensation committee used the same measures and targets
as described above for the other named executive officers, except that the
committee did not use the other operating goals measure, some of which require
subjective assessment. Accordingly, the compensation committee weighted the
measures for the Chief Executive Officer as follows:
-
60% on the Companys adjusted earnings before
interest, taxes, depreciation and amortization (adjusted
EBITDA) for 2013;
-
20% on dividend payout ratio for 2013;
and
-
20% on broadband subscriber net additions for
2013;
The performance
measures for 2013 were generally the same as those used in 2012, although as
described above the weighting changed as follows:
-
Video profitability was dropped as a discrete
performance metric for 2013; and
-
Weighting on broadband subscriber net additions
was increased from 10% to 20%.
The compensation committee believes these changes were appropriate since
(a) EBITDA, which is already the dominant component of cash flow generation and
the heaviest weighted performance metric in the payout formula, by its nature
incorporates video profitability; and (b) broadband subscriber net additions are
key element in the Companys growth strategy. In March 2013, the compensation
committee determined these measures and established a formula to link the
results with payout levels. The compensation committee used these specific
performance measures, target levels and a simple weighting of the measures
because it believed that they served to most effectively promote the Companys
primary short-term goals of increasing earnings, sustaining its dividend, and
adding broadband subscribers.
For 2013, the compensation committee established the bonus targets for
each executive, as a percentage of 2013 salary level, based on its assessment of
appropriate balance and mix between base salary and short-term bonus in
determining the total cash to be paid to each executive.
For 2013, the bonus payout targets as a percentage of salary for each
named executive officer were: 116% for Mr. Currey, 66% for Mr. Udell, 64% for
Mr. Childers, 67% for Mr. Shirar, and 41% for Mr. Young. These targets were
increased for 2013, as previously described on page 26. The compensation
committee used these levels because achieving the targeted payouts at those
levels resulted in an annual bonus payout such that the percentage of each
officers total direct compensation attributable to bonus payout would be at
roughly the 50th percentile of the percentage of total compensation paid to
executives in comparable positions at companies in the peer group. However, as
described above, the Company is aware that even after these changes, the overall
total direct compensation for its named executive officers remains below the
50
th
percentile of the relevant benchmark group. This increase is
part of a multi-year effort to transition to the 50
th
percentile
benchmark. In the case of the Chief Executive Officer, his relatively higher
target payout level reflects the difference in the level of his responsibilities
and accountability for overall Company performance.
As in prior years, the compensation committee also set a maximum payment
equal to 120% of the target amount if the goals were attained above 105% of the
target level and a threshold level such that attainment of 90% of the target
level would have resulted in a payment of 50% of the target amount. Attainment
of below 90% of the target level would have resulted in no bonus
payment.
28
For 2013, the
Company and the named executive officers achieved the Company performance
targets at the following levels:
Performance Measure
|
|
Actual
|
|
Target
|
|
% of Target
|
Adjusted
EBITDA
|
|
$286.5 million
|
|
$279.0 million
|
|
102.7%
|
Dividend Payout Ratio
|
|
64.4%
|
|
69.9%
|
|
107.7%
|
Broadband Subscriber
Net Adds
|
|
12,077
|
|
15,300
|
|
78.9%
|
Other Operating Goals
|
|
8.5/9
|
|
9.9%
|
|
94.4%
|
In the compensation committees review of 2013 performance, the
compensation committee first determined the amounts earned by the executives by
computing the weighted average of the actual achievement of the performance
targets at the levels described above. For the Chief Executive Officer, this
weighted average was 98.9% of target, and for the other named executive officers
(NEOs), this weighted average was 98.9% of target. This weighted averages
consisted of the following components, reflecting the weighting of the
performance measures described above and the actual level of achievement of
those measures:
|
|
CEOs
|
|
Other NEOs
|
|
|
Component
|
|
Component
|
Performance Measure
|
|
Percentage
|
|
Percentage
|
Adjusted EBITDA
|
|
|
61.6
|
%
|
|
|
|
51.4
|
%
|
|
Dividend Payout
Ratio
|
|
|
21.5
|
%
|
|
|
|
21.5
|
%
|
|
Broadband subscriber net adds
|
|
|
15.8
|
%
|
|
|
|
11.8
|
%
|
|
Other Operating Goals
|
|
|
N/A
|
|
|
|
14.2
|
%
|
|
Weighted Average
|
|
|
|
98.9
|
%
|
|
|
|
98.9
|
%
|
|
The following payout table was used to convert the weighted average
component percentages to a bonus payout:
Performance
|
|
Payout (as a % of Target)
|
< 90%
|
|
0%
|
90% - 94.9%
|
|
50%
|
95% - 97.9%
|
|
75%
|
98% - 101.9%
|
|
Weighted Achievement
Score
|
102% - 104.9%
|
|
110%
|
> 105%
|
|
120%
|
The resulting bonuses, all of which were paid in March 2014, represented
the following percentages of each named executive officers respective 2013
annual salary level:
|
|
2013 Bonus Payout as a
Percentage of 2013 Salary
|
|
|
Actual Percentage of
|
|
Target Opportunity, as
|
Name
|
|
Salary Paid
|
|
a Percentage of
Salary
|
Robert J.
Currey
|
|
|
114.7
|
%
|
|
|
|
116.0
|
%
|
|
C. Robert Udell, Jr.
|
|
|
65.3
|
%
|
|
|
|
66.0
|
%
|
|
Steven J.
Childers
|
|
|
63.3
|
%
|
|
|
|
64.0
|
%
|
|
Steven J. Shirar
|
|
|
66.3
|
%
|
|
|
|
67.0
|
%
|
|
Christopher A.
Young
|
|
|
40.5
|
%
|
|
|
|
41.0
|
%
|
|
The Non-Equity Incentive Plan Compensation column of the Summary
Compensation Table shows the cash bonus the compensation committee awarded to
each of the named executive officers for 2013 pursuant to this bonus
plan.
29
The compensation
committee believes that the level of the cash bonus opportunities and the cash
bonuses actually paid for 2013 performance to the named executive officers
helped serve the compensation committees executive compensation program
objectives to:
-
retain its named executive officers by providing
them with a cash bonus opportunity at a level
competitive with the Companys peer group; and
-
reward the named executive officers for
operational and financial performance.
Long-Term, Equity-Based
Incentives
The Company maintains the stockholder-approved LTIP that provides for
grants of stock options, stock, stock units and stock appreciation rights and
for the adoption of one or more cash incentive programs. The Companys
non-employee directors and certain employees, including each of the named
executive officers, are eligible for grants under the LTIP. The principal
purposes of the LTIP are to:
-
provide these individuals with incentives to
maximize stockholder return and otherwise contribute to the
Companys success; and
-
enable the Company to attract, retain and reward
the best available individuals for positions
of
responsibility.
The compensation committee administers the LTIP and determines if, when,
and in what amount awards should be granted, as well as the type of award
vehicle to be employed (choosing from among those award vehicles authorized by
the LTIP).
The Companys Executive Long-Term Incentive Program (the program)
provides a methodology for determining the equity compensation to be granted
each year. Under the program, each year the compensation committee determines
for each executive eligible to participate, including each named executive
officer, and by comparable job position, the economic value of target annualized
long-term incentive compensation at the 50th percentile of the peer group. The
Company pays 50% of this annualized target to the executives in the form of
performance shares. If in any year the compensation committee decides to make
time-based restricted share grants, the awards will be based on 50% of this
annualized target value, multiplied by the number of years the grant is to
represent.
Performance
Shares
In March 2013, the compensation committee established a target value of
long-term incentive compensation and made performance share awards equal to 50%
of this target value. The compensation committee also approved Company
performance goals and minimum, target and maximum payouts. The goals and pay out
levels were the same as those approved for the cash incentive bonus
plan.
The 2013 performance share target award levels were determined by taking
half of the annual target LTIP grant value for each of the named executive
officers, and converting that value to a number of shares based on the 20-day
average closing price for our stock as of two trading days before the award date
(discounted 10% to reflect the challenge associated with attaining the
performance goals).
The performance share awards entitled the executives to receive awards of
restricted shares in 2014 depending on the level of attainment of the
performance goals. Attainment of the goals at the target levels would result in
the target number of performance shares awarded as restricted shares, and
attainment of the goals at above or below the target levels would result in an
increased or decreased number of restricted shares awarded, using the same
formulas as those with respect to annual cash bonuses.
30
In March 2014,
the compensation committee approved awards of restricted shares based on 2013
performance, as follows:
|
|
2013 Performance
|
|
March 2014 Restricted
|
Named Executive Officer
|
|
Share Target
|
|
Shares
Earned/Awarded
|
Robert J.
Currey
|
|
|
27,308
|
|
|
|
27,007
|
|
C. Robert Udell
|
|
|
10,752
|
|
|
|
10,632
|
|
Steven L.
Childers
|
|
|
8,960
|
|
|
|
8,860
|
|
Steven J. Shirar
|
|
|
7,820
|
|
|
|
7,732
|
|
Christopher A.
Young
|
|
|
5,572
|
|
|
|
5,508
|
|
Under the terms of the performance share awards, the number of restricted
shares granted in March 2014 were to be determined, for our Chief Executive
Officer, as 98.9% of the 2013 performance share target based on the achievement
level of 98.9% of the target performance goals; and for the other named
executive officers, as also 98.9% of the 2013 performance share target based on
an achievement level of 98.9% of the target performance goals, in each case as
previously described in the Cash Bonus section above. The restricted shares
also vest at a rate equal to 25% per year on each December 5th following the
date of grant, except for our Chief Executive Officer, which vest 100% on the
first December 5th following the date of grant.
Restricted Stock
All the named executive officers received a time-based restricted stock
award in 2013. The awards to the named executive officers other than Mr. Currey
vested at a rate equal to 25% per year on each December 5th following the date
of the grant, with the last shares vesting on December 5, 2016, and were made
for an amount equal to 50% of the annual target value of long-term incentive
compensation, multiplied by three, to account for the fact that no restricted
stock grants were made to them in 2011 and 2012. This value was then converted
to a number of shares based on the 20-day average closing price for our stock as
of two trading days before the award date.
For Mr. Currey the time-based grant
awarded in March 2013, was based on 50% of his annual LTIP target value,
multiplied by two, to account for the fact that he received no restricted stock
in 2011. The 2013 grant to Mr. Currey vests at a rate equal to 50% on each
December 5th following the date of grant, with the last shares vesting on
December 5, 2014.
The time-based awards granted in March 2013, were as follows:
|
|
|
|
Vesting
|
Named Executive Officer
|
|
Restricted Stock Grant
|
|
12/5/13
|
|
12/5/14
|
|
12/5/15
|
|
12/5/16
|
Robert J.
Currey
|
|
49,656
|
|
|
50
|
%
|
|
|
|
50
|
%
|
|
|
|
|
|
|
|
|
|
|
|
C. Robert Udell
|
|
29,332
|
|
|
25
|
%
|
|
|
|
25
|
%
|
|
|
|
25
|
%
|
|
|
|
25
|
%
|
|
Steven L.
Childers
|
|
24,440
|
|
|
25
|
%
|
|
|
|
25
|
%
|
|
|
|
25
|
%
|
|
|
|
25
|
%
|
|
Steven J. Shirar
|
|
21,332
|
|
|
25
|
%
|
|
|
|
25
|
%
|
|
|
|
25
|
%
|
|
|
|
25
|
%
|
|
Christopher
Young
|
|
15,196
|
|
|
25
|
%
|
|
|
|
25
|
%
|
|
|
|
25
|
%
|
|
|
|
25
|
%
|
|
The compensation committee believes that the long-term, equity-based
incentives it awarded to the named executive officers in 2013 helped meet its
objectives to:
-
retain the named executive officers by providing
them with long-term, equity-based compensation at a
level competitive with the Companys peer group; and
-
reward the named executive officers for achieving
key financial and operational objectives, which were
attained at a 98.9% level in 2013.
31
All Other
Compensation
As part of our
executive compensation program, the Company provides certain of its executives
with the following other benefits:
-
personal use of a company
automobile;
-
living expenses if the executives
responsibilities require repeated and extended stays away from
home;
-
expenses paid for business related meals and
travel for spouses (when required to attend
company functions);
-
tax reimbursement for company automobile and
business related travel; and
-
company matching contributions to its 401(k)
plan.
The All Other Compensation column of the Summary Compensation Table on
page 34 shows the aggregate amounts of such compensation paid to each of the
named executive officers.
The compensation committee reviewed the amounts and types of perquisites
and other benefits the Company provides to its executive officers as part of its
initial benchmark group survey in the fourth quarter of 2006 and expects to
revisit it periodically to determine if adjustments are appropriate.
Employment Security
Agreements
On February 20, 2007 the Company adopted Employment Security Agreements
(ESAs) with each of its named executive officers, as well as certain other
executives. The ESAs were further amended in December 2009 as a result of the
Companys outside compensation consultants evaluation of the ESAs compared to
general market and peer company best practices. Please see the caption
Potential Payments upon Termination or Change in Control of the Company
Employment Security Agreements below for an explanation of the terms of the
ESAs.
The Company believes that the protections afforded by the agreements are
a valuable incentive for attracting and retaining top managers. It believes that
the agreements are particularly important because the Company does not have
employment agreements or long-term arrangements with its executives. The Company
also believes that, in the event of an extraordinary corporate transaction, the
agreements could prove crucial to the Companys ability to retain top management
through the transaction process.
Deductibility of
Compensation
Section 162(m) of the Internal Revenue Code limits the deductibility of
executive compensation paid to the Chief Executive Officer and to each of the
three other most highly compensated officers of a public company (other than the
Chief Financial Officer) to $1 million per year. However, compensation that is
considered qualified performance-based compensation generally does not count
toward the $1 million deduction limit.
We believe it is in the best interests of our shareholders for us to
maximize tax deductibility when appropriate. Although deductibility of
compensation is preferred, tax deductibility is not a primary objective of our
compensation programs. We believe it is important to retain the flexibility to
compensate executives competitively. The compensation committee and the board
consider the impacts of Section 162(m) in developing, implementing and
administering our compensation programs. However, the compensation committee
balances this consideration with our primary goal of structuring compensation
programs to attract, motivate and retain highly talented executives. As such,
individual exceptions may occur when the compensation committee or the board,
after balancing tax efficiency with long term strategic objectives, believes
such exceptions to be in the best interests of our shareholders.
The Company annually reviews the compensation paid to its chief executive
officer and each of the three other most highly compensated officers other than
the Chief Financial Officer to determine the deductibility of compensation under
Section 162(m). Base salary, by its nature, does not qualify as
performance-based under Section 162(m). The Companys grants of
performance-based restricted stock and annual cash bonus payments
32
under the LTIP qualify as
performance-based compensation, and the time-based restricted stock grants and
annual cash bonus payments under the LTIP to the other officers were in amounts
that are not expected to raise deductibility issues under Section
162(m).
For 2013, the
Company believes all compensation paid to its executives is fully deductible by
the Company without regard to Code Section 162(m).
Changes to Compensation Program for
2014 resulting from Mr. Udells Promotion
On November 4, 2013, the board elected Mr. Udell as a Class III director,
with a term to expire at the 2014 annual meeting of the Companys stockholders,
and also appointed Mr. Udell as the President and Chief Operating Officer of the
Company. In conjunction with this increase in his duties and responsibilities,
the board increased Mr. Udells compensation as follows:
-
Mr. Udells base salary for 2014 was increased
from $294,000 to $323,000, and
-
Mr. Udells target annual cash bonus for 2014
performance was increased from $193,000 to $210,000.
33
EXECUTIVE COMPENSATION
2013 Summary Compensation
Table
The following
table lists information regarding the compensation for the years ended December
31, 2013, 2012 and 2011, of our Chief Executive Officer, Chief Financial Officer
and each of the other executive officers named in this section, to whom we refer
to, collectively, as the named executive officers.
Name and
|
|
|
|
|
|
|
|
Stock
|
|
Non-Equity
|
|
|
|
|
|
|
Principal
|
|
|
|
|
|
|
|
Awards
|
|
Incentive Plan
|
|
All Other
|
|
|
|
|
Position
|
|
|
Year
|
|
Salary($)
|
|
Bonus($)(1)
|
|
($)(2)
|
|
Compensation($)
|
|
Compensation($)
|
|
|
|
Total
($)
|
Robert J. Currey
|
|
2013
|
|
$422,885
|
|
$0
|
|
$1,318,393
|
|
$486,588
|
|
$96,366
|
|
(3)
|
|
$2,324,232
|
Chief
Executive
|
|
2012
|
|
$370,000
|
|
$40,700
|
|
$377,199
|
|
$444,000
|
|
$68,419
|
|
|
|
$1,300,318
|
Officer
and
|
|
2011
|
|
$370,000
|
|
$0
|
|
$1,034,988
|
|
$435,120
|
|
$77,810
|
|
|
|
$1,917,918
|
Chairman
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
C. Robert Udell, Jr.
|
|
2013
|
|
$295,654
|
|
$0
|
|
$686,639
|
|
$190,877
|
|
$83,338
|
|
(4)
|
|
$1,256,508
|
President and Chief
|
|
2012
|
|
$248,923
|
|
$20,000
|
|
$167,428
|
|
$165,000
|
|
$55,746
|
|
|
|
$657,097
|
Operating Officer
|
|
2011
|
|
$222,000
|
|
$0
|
|
$120,136
|
|
$108,780
|
|
$64,271
|
|
|
|
$515,187
|
|
Steven L. Childers
|
|
2013
|
|
$249,885
|
|
$0
|
|
$572,142
|
|
$159,229
|
|
$75,338
|
|
(5)
|
|
$1,056,594
|
Senior
Vice
|
|
2012
|
|
$222,000
|
|
$16,650
|
|
$123,404
|
|
$122,100
|
|
$54,643
|
|
|
|
$538,797
|
President and CFO
|
|
2011
|
|
$222,000
|
|
$0
|
|
$120,136
|
|
$108,780
|
|
$60,859
|
|
|
|
$511,775
|
|
Steven J. Shirar
|
|
2013
|
|
$238,346
|
|
$0
|
|
$499,374
|
|
$159,229
|
|
$89,813
|
|
(6)
|
|
$986,762
|
Senior
Vice
|
|
2012
|
|
$222,000
|
|
$16,650
|
|
$123,404
|
|
$122,100
|
|
$73,228
|
|
|
|
$557,382
|
President and
|
|
2011
|
|
$222,000
|
|
$0
|
|
$120,136
|
|
$108,780
|
|
$78,679
|
|
|
|
$529,595
|
Secretary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Christopher A. Young
|
|
2013
|
|
$228,692
|
|
$0
|
|
$355,756
|
|
$94,944
|
|
$56,629
|
|
(7)
|
|
$736,021
|
Chief
Information
|
|
2012
|
|
$196,000
|
|
$13,720
|
|
$91,462
|
|
$86,240
|
|
$44,181
|
|
|
|
$431,603
|
Officer
|
|
2011
|
|
$196,000
|
|
$0
|
|
$89,062
|
|
$76,832
|
|
$49,805
|
|
|
|
$411,699
|
(1)
|
|
Bonus
The amounts in this column represent a
one-time cash award to each of the named executive officers, made in 2012,
intended to approximate the annualized impact of a 5% wage
increase.
|
|
(2)
|
|
Stock Awards
The amounts in this column represent
the grant date fair value, computed in accordance with Financial
Accounting Standards Board Statement Accounting Standards Codification
Topic 718, of the restricted stock granted in 2013, 2012 and 2011 and the
target number of performance shares awarded in 2013, 2012 and 2011 based
upon the probable outcome of the performance conditions. The grant date
value of the performance shares in 2013 assuming the performance
conditions were met at the maximum level was for Mr. Currey: $561,326; for
Mr. Udell: $221,018; for Mr. Childers: $184,182; for Mr. Shirar: $160,748;
and for Mr. Young: $114,538. Also, see Footnote 8 to the Consolidated
Financial Statements contained in the Companys Annual Report on Form 10-K
for the years ended December 31, 2013, 2012 and 2011 for an explanation of
the assumption made by the Company in the valuation of these
awards.
|
|
(3)
|
|
All Other
Compensation Robert J. Currey.
This
column includes $15,300.00 of matching contributions made in 2013 under
the Companys 401(k) Plan on behalf of Mr. Currey. Mr. Currey is also
provided with personal use of a Company automobile ($469.30), a tax
gross-up reimbursement in connection with payment for his personal use
of a Company automobile ($176.67), and the value of dividends paid on
unvested restricted stock ($80,420.07).
|
|
(4)
|
|
All Other
Compensation C. Robert Udell, Jr.
This column includes $15,300.00 of matching contributions made in
2013 under the Companys 401(k) Plan on behalf of Mr. Udell and the value
of dividends paid on unvested restricted stock
($68,037.88).
|
34
(5)
|
|
All Other
Compensation Steven L. Childers.
This
column includes $15,300.00 of matching contributions made in 2013 under
the Companys 401(k) Plan on behalf of Mr. Childers. Mr. Childers is
provided $600.00 as a cell phone allowance, and the value of dividends
paid on unvested restricted stock ($59,438.05).
|
|
(6)
|
|
All Other
Compensation Steven J. Shirar.
This
column includes $15,300.00 of matching contributions made in 2013 under
the Companys 401(k) Plan on behalf of Mr. Shirar. The Company also
provides Mr. Shirar with living expenses while working at its Mattoon
headquarters location ($6,000), with personal use of a Company automobile
($5,330.55) and a tax gross-up reimbursement in connection with payment
for his Mattoon living expenses and his personal use of a Company
automobile ($7,356.57), and the value of dividends paid on unvested
restricted stock ($55,826.11).
|
|
(7)
|
|
All Other
Compensation Christopher A. Young.
This column includes $15,300.00 of matching contributions made in
2013 under the Companys 401(k) Plan on behalf of Mr. Young. Mr. Young is
provided $600.00 as a cell phone allowance and the value of dividends paid
on unvested restricted stock ($40,729.15).
|
Salary
The Salary
column of the Summary Compensation Table shows the salaries paid in 2013, 2012
and 2011 to each of the named executive officers. The salary rates in effect for
2013 were:
Robert J.
Currey
|
$
|
425,000
|
|
C. Robert Udell, Jr.
|
$
|
294,000
|
(1)
|
Steven L.
Childers
|
$
|
251,000
|
|
Steven J. Shirar
|
$
|
239,000
|
|
Christopher A.
Young
|
$
|
230,000
|
|
(1)
|
|
Effective November 7,
2013 Mr. Udells salary was increased to $323,000 when he was appointed as
President and a director of the Company.
|
Non-Equity Incentive
Compensation
The Non-Equity Incentive Plan Compensation column of the Summary
Compensation Table shows the cash bonus the Company awarded to each of the named
executive officers for 2013, 2012 and 2011 pursuant to the Companys bonus plan.
For more information, please refer to the Compensation Discussion and Analysis
section of this proxy statement on page 23. The Company paid all of these
amounts in March 2014, March 2013 and March 2012, respectively.
35
2013 Grants of Plan-Based
Awards
This table sets forth information for each
named executive officer with respect to (1) estimated possible payouts under
non-equity incentive plan awards and (2) equity incentive plan awards that could
have been earned for 2013.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards:
|
|
Grant
Date
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated
Future Payouts
|
|
Number of
|
|
Fair
Value
|
|
|
|
|
Estimated
Future Payouts Under
|
|
Under Equity
Incentive Plan
|
|
Shares of
|
|
of Stock
and
|
|
|
Grant
|
|
Non-Equity Incentive Plan
Awards(1)
|
|
Awards(2)
|
|
Stock or
|
|
Option
|
Name
|
|
Date
|
|
Threshold($)
|
|
Target($)
|
|
Maximum($)
|
|
Threshold
|
|
Target
|
|
Maximum
|
|
Units(3)
|
|
Awards(4)
|
Robert J.
Currey
|
|
|
|
$
|
246,000
|
|
$
|
492,000
|
|
$
|
590,400
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/12/13
|
|
|
|
|
|
|
|
|
|
|
13,654
|
|
27,308
|
|
32,769
|
|
|
|
|
|
|
|
3/12/13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
49,656
|
|
$
|
1,318,393
|
C. Robert Udell, Jr.
|
|
|
|
$
|
96,500
|
|
$
|
193,000
|
|
$
|
231,600
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/12/13
|
|
|
|
|
|
|
|
|
|
|
5,376
|
|
10,752
|
|
12,902
|
|
|
|
|
|
|
|
3/12/13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29,332
|
|
$
|
686,639
|
Steven L.
Childers
|
|
|
|
$
|
80,500
|
|
$
|
161,000
|
|
$
|
193,200
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/12/13
|
|
|
|
|
|
|
|
|
|
|
4,480
|
|
8,960
|
|
10,752
|
|
|
|
|
|
|
|
3/12/13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24,440
|
|
$
|
572,142
|
Steven J. Shirar
|
|
|
|
$
|
80,500
|
|
$
|
161,000
|
|
$
|
193,200
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/12/13
|
|
|
|
|
|
|
|
|
|
|
3,910
|
|
7,820
|
|
9,384
|
|
|
|
|
|
|
|
3/12/13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21,332
|
|
$
|
499,374
|
Christopher
A.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Young
|
|
|
|
$
|
48,000
|
|
$
|
96,000
|
|
$
|
115,200
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/12/13
|
|
|
|
|
|
|
|
|
|
|
2,786
|
|
5,572
|
|
6,686
|
|
|
|
|
|
|
|
3/12/13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,196
|
|
$
|
355,756
|
____________________
(1)
|
Estimated Future
Payouts Under Non-Equity Incentive Plan Awards.
Payouts under the bonus plan were based on performance
in 2013. The performance targets were set in March 2013, as described in
the Compensation Discussion and Analysis section under the caption Annual
Incentive Compensation. The amounts actually paid under the bonus plan
for 2013 appear in the Non-Equity Incentive Plan Compensation column of
the Summary Compensation Table. Pursuant to the bonus plan for 2013, the
compensation committee established a performance award formula which
linked the payouts to the weighted average achievement across the four
goal areas it had established. Target payout was to be made if the
performance goals were attained at target level, and the payout was to be
capped at a maximum payment of 120% of the target level if the goals were
attained at or above the 105% level and payout was to be zero if the
performance goals were attained below the 90% level (payout at the 90%
level of attainment resulted in a payment of 50% of the target payout
level). The compensation committee had discretion to determine payouts for
achievement between threshold and target, and target and
maximum.
|
|
(2)
|
Estimated Future
Payouts Under Equity Incentive Plan Awards.
These columns show the threshold, target and maximum number of
shares of restricted stock that could have been awarded in 2014 pursuant
to performance shares previously granted in March 2013. These awards of
restricted stock were based on performance in 2013, which has now
occurred. Pursuant to the LTIP for 2013, the compensation committee
granted performance shares to executives, which reflected the target
number of shares of restricted stock to be granted in 2014 if target
performance goals set by the compensation committee for 2013 were met. The
target award was subject to adjustment based on the weighted average level
of attainment of the performance goals, subject to a maximum award of 120%
of the target number of shares if the goals were attained at a 105% level
and a minimum of zero shares if the goals were attained below an 90% level
(attainment of goals at the 90% level resulted in an award of 50% of the
target number of shares). The LTIP is described in the Compensation
Discussion and Analysis section under the caption Long-Term, Equity Based
Incentives.
|
36
(3)
|
All Other Stock
Awards: Number of Shares of Stock or Units.
This column shows the number of time-based restricted shares
awarded to the named executive officers in 2013.
|
|
(4)
|
Grant Date Fair
Value of Stock and Option Awards.
This
column shows the grant date fair value, computed in accordance with
Financial Accounting Standards Board Statement Accounting Standards
Codification Topic 718, of the target performance share awards and the
time-based restricted stock awards made in 2013 to the named executive
officers. See Footnote 8 to the Consolidated Financial Statements
contained in the Companys Annual Report on Form 10-K for the year ended
December 31, 2013 for an explanation of the assumptions made by the
Company in the valuation of these awards.
|
Outstanding Equity Awards at 2013
Fiscal Year-End
This table sets
forth information for each named executive officer with respect to each award of
restricted shares that had been made at any time, had not vested, and remained
outstanding at December 31, 2013.
|
|
Stock Awards
|
|
|
Number of Shares or
|
|
Market Value of Shares
|
|
|
Units of Stock That
|
|
or Units of Stock That
|
Name
|
|
Have Not Vested
(#)(1)
|
|
Have Not Vested
($)(2)
|
Robert J.
Currey
|
|
|
24,828
|
|
|
|
$
|
487,374
|
|
C. Robert Udell, Jr.
|
|
|
33,757
|
|
|
|
$
|
662,650
|
|
Steven L.
Childers
|
|
|
28,207
|
|
|
|
$
|
553,704
|
|
Steven J.
Shirar
|
|
|
25,876
|
|
|
|
$
|
507,946
|
|
Christopher A.
Young
|
|
|
18,719
|
|
|
|
$
|
367,454
|
|
____________________
(1)
|
Number Of Shares Or
Units Of Stock That Have Not Vested.
For Mr. Currey, the unvested shares represent 50% of the time-based
grant made to Mr. Currey in March 2013 and unvested performance-based
shares from the grant made in March 2013. For each of the other named
executive officers, the unvested shares represent a mix of time-based
restricted shares from the grant made in March 2013; and unvested
performance-based shares from grants made in March 2011; March 2012; and
March 2013.
|
|
(2)
|
Market Value Of
Shares Or Units Of Stock That Have Not Vested.
Represents the number of shares of common stock covered by the
restricted shares valued using $19.63 (the closing market price of the
Companys common stock as reported in
The Wall Street Journal
for
December 31, 2013, which was the last trading day of fiscal year
2013).
|
37
2013 Option Exercises and Stock
Vested
This table sets
forth information concerning the number of restricted shares that vested during
2013 and the value of those vested shares. The Company has not granted
options.
|
|
Stock
Awards
|
|
|
Number of Shares
|
|
|
|
|
Acquired On
|
|
Value Realized
|
Name
|
|
Vesting (#)
|
|
On Vesting
($)(1)
|
Robert J. Currey
|
|
|
44,372
|
|
|
|
$
|
851,055
|
|
C.
Robert Udell, Jr.
|
|
|
19,870
|
|
|
|
$
|
381,107
|
|
Steven L. Childers
|
|
|
18,020
|
|
|
|
$
|
345,624
|
|
Steven J. Shirar
|
|
|
17,243
|
|
|
|
$
|
330,721
|
|
Christopher A. Young
|
|
|
12,668
|
|
|
|
$
|
242,972
|
|
____________________
(1)
|
Value Realized on
Vesting.
Represents the number of
shares of common stock covered by the restricted shares acquired on
vesting of such restricted shares on December 5, 2013, as shown in the
Number of Shares Acquired on Vesting column valued using the closing
market price of the common stock ($19.18) as reported in
The Wall Street Journal
for the date of vesting of the restricted
shares.
|
POTENTIAL PAYMENTS UPON TERMINATION
OR CHANGE IN CONTROL OF THE COMPANY
Pursuant to its Employment Security Agreements and the LTIP, the Company
provides eligible employees, including the named executive officers, with
certain benefits upon a change in control of the Company or upon certain types
of termination of employment following a change in control of the Company. These
benefits are in addition to those benefits to which employees would be entitled
upon a termination of employment generally (i.e., vested retirement benefits
accrued as of the date of termination, stock awards that are vested as of the
date of termination, and the right to elect continued health benefits pursuant
to COBRA). Those incremental benefits as they pertain to the named executive
officers are described below:
Employment Security
Agreements
The Company has Employment Security Agreements with the named executive
officers and certain other executives, which provide benefits upon the
occurrence of certain terminations of employment following a change in control
of the Company. The Agreements with named executive officers provide for
benefits upon the following types of employment termination:
-
an involuntary termination of the executives
employment by the Company without cause that occurs
within 24 months after a change in control of the Company; or
-
a voluntary termination of employment by the
executive for good reason that occurs within 24 months
after a change in control of the Company.
The benefits provided upon such a termination of employment include the
following:
-
A lump sum cash payment, payable within 30 days of
the termination of employment, equal to two times
(three times in the case of the Chief Executive Officer) the sum of (i)
the executives annual base salary
rate,
determined as of the date of the change in control or, if higher, the date of
employment termination
and (ii) the annual
target amounts payable to the executive under all cash-based incentive plans
of
the Company for the year in which the change
in control occurs, or if higher, the date of employment
termination.
-
A pro rata portion of the amounts that would have
been paid to the executive under the Companys cash-
based incentive plans for the year in which the termination of
employment occurs (determined at the
target
levels), if such amounts would not otherwise be paid to the executive.
38
-
Continuation of coverage under all welfare plans
of the Company during the two-year severance period
(three years for the Chief Executive Officer), or if earlier, until the
executive is eligible for coverage
under
similar plans from a new employer. Such coverage will be on the same basis and
at same cost as in
effect prior to the change
in control, or any time after, if more favorable to the executive. If such
coverage
is not available under the plan, the
Company shall provide substantially similar benefits. The COBRA
period for benefit continuation begins after the end of the
initial continuation period described above.
-
Reimbursement of out-of-pocket expenses, including
attorneys fees, incurred by the executive in
connection with the successful enforcement of any provision of the
Agreement.
The Agreements
will reduce the benefits described above to the extent necessary to avoid the
imposition of any excise tax pursuant to Section 280G of the Internal Revenue
Code.
The Agreements contain restrictive covenants that prohibit the executive
from (i) associating with a business that is competitive with any line of
business of the Company for which the executive provided substantial services,
in any geographic area in which such line of business was active at the time of
the executives termination, without the Companys consent and (ii) soliciting
the Companys customers, agents or employees. These restrictive covenants remain
in effect during the 12-month period following termination of
employment.
For purposes of the Agreements:
(a) change in control means (i) the
acquisition, by a person other than an affiliate of Richard A. Lumpkin, of a
majority of the voting power of the Companys outstanding securities; (ii)
during any period of two consecutive years or less, the incumbent directors
cease to constitute a majority of the Board, unless any new directions election
or nomination was approved by at least 2/3 of the incumbent directors; (iii) a
reorganization, merger, consolidation or share exchange resulting in the
conversion or exchange of the Companys common stock into securities of another
company, or any dissolution or liquidation, or a sale of 50% or more of all the
Companys assets; or (iv) a merger, consolidation, reorganization or share
exchange, unless following such transaction at least a majority of the voting
power of the outstanding securities of the surviving entity is owned, in the
same proportion, by substantially the persons who owned the Companys
outstanding voting securities immediately prior to the transaction.
(b) cause means the executives (i)
conviction or admission of guilt with respect to any felony, fraud,
misappropriate or embezzlement, (ii) malfeasance or gross negligence in the
performance of his duties that is materially detrimental to the Company, or
(iii) breach of any Company code of conduct, if the consequence would be
termination of employment. In each case, the Company must give the executive
written notice of the existence of cause, and if the act is capable of being
cured, 30 days in which to cure.
(c) good reason means (i) a reduction
in the executives base salary and/or bonus opportunity without his consent,
(ii) a reduction in the scope or importance of the executives duties and
responsibilities without his consent, or (iii) a transfer of the executives
primary worksite of more than 30 miles (unless the new worksite is closer to the
executives residence). In each case, the executive must give written notice
within 90 days and the Company has 30 days in which to cure the action
constituting good reason.
Amended and Restated Consolidated
Communications Holdings, Inc. 2005 Long-Term Incentive Plan
The LTIP provides that if there is a change in control of the Company,
and there is no assumption of outstanding awards by the successor entity, or
conversion of outstanding awards into comparable equity awards of the successor
entity, then as of the effective date of the change in control all stock options
and stock appreciation rights will vest and all restrictions on all outstanding
stock awards and stock unit awards will lapse, and if any restrictions relate to
satisfying performance goals, the performance goals will be deemed satisfied at
target levels (unless the target level was exceeded for any performance goal
before the effective date of the change in control, in which case the
restrictions will lapse based on actual attainment of the performance goal). The
LTIP also provides that if in connection with the change in control the LTIP
awards are assumed or converted by the successor entity as described above, and
within 24 months following the effective date of the change in control the
participants employment is terminated without cause or the participant
terminates employment for good reason, or a participant who is a director is
asked to resign for other than cause, all stock options and stock appreciation
rights will vest
39
and all restrictions on all outstanding
stock awards and stock unit awards will lapse, and if any restrictions relate to
satisfying performance goals, the performance goals will be deemed satisfied at
target levels (unless the target level was exceeded for any performance goal
before the date of termination of employment or service, in which case the
restrictions will lapse based on actual attainment of the performance
goal).
The LTIP uses the
same definitions of change in control, cause and good reason as set forth in the
Employment Security Agreements.
The tables set forth below quantify the additional benefits as described
above that would be payable to each named executive officer under the
arrangements described above.
Termination of Employment Following a
Change in Control
The additional amounts set forth in this table would be payable pursuant
to the Employment Security Agreements, assuming a change in control of the
Company and that the named executive officer became eligible for benefits
following a termination of employment on December 31, 2013.
|
|
Robert J.
|
|
C. Robert
|
|
Steven L.
|
|
Steven J.
|
|
Christopher A.
|
Name
|
|
Currey
|
|
Udell, Jr.
|
|
Childers
|
|
Shirar
|
|
Young
|
Base
Salary(1)
|
|
|
$
|
1,275,000
|
|
|
|
$
|
626,000
|
|
|
|
$
|
502,000
|
|
|
|
$
|
478,000
|
|
|
|
$
|
460,000
|
|
Bonus(1)
|
|
|
$
|
1,476,000
|
|
|
|
$
|
420,000
|
|
|
|
$
|
322,000
|
|
|
|
$
|
322,000
|
|
|
|
$
|
192,000
|
|
Welfare Benefits
for
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Severance
Period(2)
|
|
|
$
|
31,386
|
|
|
|
$
|
24,108
|
|
|
|
$
|
21,224
|
|
|
|
$
|
31,270
|
|
|
|
$
|
21,224
|
|
____________________
(1)
|
Base Salary and
Bonus.
These amounts represent, in the
case of Mr. Currey, three times base salary and target bonus, and in the
case of all other named executive officers, two times base salary and
target bonus.
|
|
(2)
|
Welfare Benefits
for Severance Period.
Amounts in this
row consist of projected Company premiums for health (including medical,
dental, vision), life, AD&D and disability policies, reduced by the
amount of projected employee premiums during the severance period for each
named executive officer.
|
Benefits Upon Change in
Control
The additional amounts set forth in this table would be realized by each
named executive officer under the LTIP, assuming a change of control of the
Company occurred on December 31, 2013.
|
|
Robert J.
|
|
C. Robert
|
|
Steven L.
|
|
Steven J.
|
|
Christopher A.
|
Name
|
|
Currey
|
|
Udell, Jr.
|
|
Childers
|
|
Shirar
|
|
Young
|
Value of Unvested
Restricted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares(1)
|
|
|
$
|
487,374
|
|
|
|
$
|
662,650
|
|
|
|
$
|
553,704
|
|
|
|
$
|
507,946
|
|
|
|
$
|
367,454
|
|
____________________
(1)
|
Amounts in this row
represent the value of the restricted shares that would vest upon the
change in control on December 31, 2013 under the terms of the LTIP. The
value of the restricted shares is based on the closing market price of the
Companys stock as reported in
The Wall
Street Journal
for December 31, 2013
($19.63), which was the last trading day of fiscal year
2013.
|
40
PROPOSAL NO. 3 ADVISORY VOTE ON
EXECUTIVE COMPENSATION
Pursuant to
Section 14A of the Exchange Act, we are required to submit to stockholders a
resolution subject to an advisory vote to approve the compensation of our named
executive officers at least every three years. At the 2011 annual meeting, the
stockholders voted, on an advisory basis, to hold such a vote every three years
and the board subsequently determined, consistent with the stockholders vote,
to hold such a vote every three years. Accordingly, we are presenting this vote
at the 2014 annual meeting. The next such vote will take place at the 2017
annual meeting.
The board of directors encourages stockholders to carefully review the
Executive Compensation section of this Proxy Statement beginning on page 34,
including the Compensation Discussion and Analysis, for a thorough discussion
of our compensation program for named executive officers. Our executive
compensation objectives are to:
-
provide incentives to our executives to maximize
stockholder return;
-
enable us to attract, retain and reward talented,
results-oriented managers capable of leading key areas of
our business; and
-
reward the management team for achieving key
financial and operational objectives which will promote
the long-term health of the business.
We have pursued these objectives
by:
-
using restricted shares in an effort to unify the
interests of the our executives and stockholders;
-
establishing annual operating and performance
goals for the Company and linking compensation of the
named executive officers to this performance;
-
using a cash incentive bonus plan and performance
share awards that tie the level of achievement of our
annual financial and operational performance goals to the amount of
annual cash incentive compensation
that we pay
to each of our executives and a portion of the restricted shares awarded to
them; and
-
using compensation information compiled from 16
competitor companies that operate in the integrated
communications, wireless telecommunications, communications equipment
and broadcasting and
cable television
industries and that had annual revenues ranging from $200 million to $1.5
billion to
benchmark compensation against
competitive levels.
Accordingly, the following resolution is submitted for an advisory
stockholder vote at the 2014 annual meeting:
RESOLVED, that
the compensation paid to the Companys named executive officers, as disclosed
pursuant to Item 402 of Regulation S-K, including the Compensation Discussion
and Analysis, compensation tables and narrative discussion, is hereby
approved.
Board Recommendation and
Stockholder Vote Required
The board of directors recommends a vote FOR the approval of
the compensation of the Companys named executive officers (Proposal No. 3 on
the proxy card).
The affirmative vote of
the holders of a majority of the votes represented at the annual meeting in
person or by proxy will be required for approval. As this is an advisory vote,
the result will not be binding on the Company, the board of directors or the
compensation committee, although the board of directors and the compensation
committee will carefully consider the outcome of the vote when evaluating our
compensation program.
41
CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS
Related Person Transactions
Policy
Our audit
committee has adopted a written Related Person Transactions Policy, which
provides for procedures for review and oversight of transactions involving the
Company and related persons (which consists of directors, director nominees,
executive officers and stockholders owning five percent or more of the Companys
outstanding stock, any of their immediate family members, and any firm,
corporation or other entity in which any of the foregoing persons is employed,
is a general partner, principal or in a similar position or has, together with
the beneficial ownership interests of all other related persons, a 10% or
greater beneficial ownership interest). The policy covers any related person
transaction that would be required to be disclosed in our proxy statement under
applicable SEC rules (generally, transactions in which the Company is a
participant, the amount involved exceeds $120,000 and in which a related
person has a direct or indirect material interest).
Certain transactions are not subject to specific review under the policy
by virtue of being exempt from the set of related person transactions that must
be disclosed pursuant to applicable SEC rules (exempt transactions). In
addition, the audit committee has approved in the policy the provision of
products or services by the Company and its subsidiaries to related persons,
if conducted in the ordinary course of business and on terms that are no less
favorable to the Company than those available to customers who are not related
to the Company.
The policy requires, prior to a party entering into any related person
transaction (other than an exempt transaction), to provide, to the extent
practicable, notice to the Company of the proposed related person transaction.
The audit committee or its chairperson may approve only those related person
transactions that are in, or are not inconsistent with, the best interests of
the Company and its stockholders, as the audit committee or its chairperson, as
applicable, determines in good faith. In the event the Company becomes aware of
a related person transaction that has not been previously approved or previously
ratified under the policy that is pending or ongoing, it will be submitted to
the audit committee or its chairperson, as applicable, which shall evaluate all
options, including but not limited to ratification, amendment or termination of
the related person transaction, and (if appropriate) any disciplinary actions
recommended. No member of the audit committee may participate in the
consideration, approval or ratification of any related person transaction with
respect to which such member or any of his or her immediate family members is
the related person or in which he, she or they otherwise have an
interest.
SKL Investment Group
Richard A. Lumpkin, together with members of his family, beneficially
owns 100% of SKL Investment Group, a Delaware limited liability company (SKL),
which is an investment company serving the Lumpkin family. Mr. Lumpkin and
members of his family are the sole voting members of SKL. SKL and its related
entities paid $58,874 to the Company in 2013 for the use of office space,
computers, telephones and for other office related equipment. This amount is
based upon actual usage incurred by SKL. For example, in 2013, SKL paid $38,580
to rent approximately 2,191 square feet of office space, which is equivalent to
the Companys base rent per square foot plus a prorated share of real-estate
taxes, utilities, and maintenance. The charges for use of equipment and other
office related expenses were based on actual third-party charges or SKLs
estimated share of usage. The Company believes these terms are reasonable and
customary, and are comparable to those which would have been obtained in an
arms-length transaction.
LATEL Sale/Leaseback
The Company paid $862,033 during 2013 to lease office and warehouse space
from LATEL, LLC, a limited liability company of which Mr. Lumpkin and his
immediate family have a beneficial ownership of 70.7%. Agracel Inc. (Agracel)
is a real estate investment company of which Mr. Lumpkin, together with his
family, beneficially owns 41.3%. In addition, Mr. Lumpkin and his son, Benjamin
I. Lumpkin, are directors of Agracel. Agracel is the sole managing member and
50% owner of LATEL, LLC. These payments represent 86% of the total revenue of
LATEL, LLC.
42
First Mid-Illinois Bancshares,
Inc.
Pursuant to
various agreements with Consolidated Communications, Inc. (CCI), First
Mid-Illinois provides the Company with general banking services, including
depository, disbursement and payroll accounts, on terms comparable to those
available to other large unaffiliated business accounts. Mr. Lumpkin and members
of his family own approximately 30.7% of the common stock, 30.4% of the Series B
Non-Cumulative Perpetual Convertible Preferred Stock and 30.0% of the Series C
Non-Cumulative Perpetual Convertible Preferred Stock of First Mid-Illinois. In
addition, Benjamin I. Lumpkin, the son of Richard A. Lumpkin, is a director of
First Mid-Illinois. During 2013, the Company paid maintenance and activity
related charges of $12,072 to First Mid-Illinois and earned $286 of interest on
its deposits. The fees charged and earnings received on deposits through
repurchase agreements, are based on First Mid-Illinois standard schedule for
large customers.
Illinois Consolidated Telephone Company (ICTC), a wholly owned
subsidiary of the Company, provides First Mid-Illinois with local dial tone,
custom calling features, long distance and other telecommunications services. In
2013, First Mid-Illinois paid ICTC approximately $408,388 for these services.
These services are based on standard prices for strategic business
customers.
The Companys payments to First Mid-Illinois and its subsidiaries did not
exceed 1% of the gross revenue of First Mid-Illinois. Also, payments from First
Mid-Illinois did not exceed 1% of the Companys gross revenue.
Consolidated Communications,
Inc.
On May 30, 2012, the Company, through Consolidated Communications, Inc.,
a wholly-owned subsidiary of the Company, completed a $300,000,000 offering of
its 10.875% Senior Notes, sold at 99.345% for a yield to maturity of 11.00%. The
Richard Adamson Lumpkin Trust dated 2/6/70 fbo Richard Anthony Lumpkin purchased
$10,000,000, Robert J. Currey purchased $500,000 and Roger H. Moore purchased
$250,000 of the Senior Notes. The Senior Notes mature on June 1, 2020 and pay
interest semi-annually in arrears on June 1 and December 1 of each year,
commencing on December 1, 2012. During 2013, the aforementioned Trust received
$1,087,500 in interest, Robert J. Currey received approximately $54,375 in
interest and Roger H. Moore received approximately $27,188 in
interest.
COMPENSATION COMMITTEE INTERLOCKS AND
INSIDER PARTICIPATION
During 2013, Roger H. Moore, Maribeth S. Rahe, Thomas A. Gerke and
Timothy D. Taron served on the compensation committee. No member of the
compensation committee was, during 2013, an officer or employee of the Company,
was formerly an officer of the Company, or had any relationship requiring
disclosure by the Company as a related party transaction under Item 404 of
Regulation S-K, other than Mr. Moore. Please see Certain Relationships and
Related Transactions Consolidated Communications, Inc. Senior Notes. During
2013, none of the Companys executive officers served on the board of directors
or the compensation committee of any other entity, any officers of which served
either on the Companys board of directors or its compensation committee.
ANNUAL REPORT TO
STOCKHOLDERS
Our combined 2013 annual report to stockholders and annual report on Form
10-K for the year ended December 31, 2013 accompanies this proxy statement.
43
STOCKHOLDER PROPOSALS FOR 2014 ANNUAL
MEETING
The proxy rules
of the SEC permit our stockholders, after notice to the Company, to present
proposals for stockholder action in our proxy statement where such proposals are
consistent with applicable law, pertain to matters appropriate for stockholder
action and are not properly omitted by our action in accordance with the proxy
rules. In order for any stockholder proposal to be considered for inclusion in
our proxy statement to be issued in connection with our 2015 annual meeting of
stockholders, that proposal must be received at our principal executive offices,
121 South 17th Street, Mattoon, Illinois 61938-3987 (Attention: Secretary), no
later than November 27, 2014.
Our amended and restated bylaws provide that certain additional
requirements be met in order that business may properly come before the
stockholders at the annual meeting. Among other things, stockholders intending
to bring business before the annual meeting must provide written notice of such
intent to the Secretary of the Company. Such notice must be given not less than
90 days nor more than 120 days prior to the first anniversary of the date on
which we mailed our proxy materials for the preceding years annual meeting. In
addition, the following information must be provided regarding each proposal: as
to each person whom the stockholder proposes to nominate for election as a
director, the name, age, business address and, if known, residential address,
principal occupation or employment, the class, series and number of shares
beneficially owned by such nominee and all information relating to such person
that is required to be disclosed in solicitations of proxies for election of
directors, or is otherwise required by Regulation 14A of the Exchange Act,
including such persons written consent to being named in the proxy statement as
a nominee and to serving as a director if elected; a brief description of the
business desired to be brought before the meeting; the text of any resolution
proposed to be adopted at the meeting; and the reasons for conducting such
business at the meeting; and a statement of any material interest in such
business of such stockholder and the beneficial owner, if any, on whose behalf
the proposal is made and, in the case of director nominations, a description of
all arrangements or understandings between the stockholder and each nominee and
any other persons (naming them) pursuant to which the nominations are to be made
by the stockholder.
In addition, the following information must be provided regarding the
stockholder giving the notice and the beneficial owner, if any, on whose behalf
the proposal is made: the name and address of such stockholder, as it appears on
the Companys stock transfer books, and of such beneficial owner; the class,
series and number of shares of the Company which are owned beneficially and of
record by such stockholder and such beneficial owner; a representation that the
stockholder giving the notice is a stockholder of record and intends to appear
in person or by a qualified representative at the annual meeting to bring the
business proposed in the notice before the meeting; a representation whether the
stockholder or the beneficial owner, if any, intends or is part of a group which
intends to solicit proxies from stockholders in support of such proposal or
nomination; and any other information relating to such stockholder that would be
required to be disclosed in a proxy statement or other filings required to be
made in connection with solicitations of proxies for election of directors
pursuant to the Exchange Act and the rules and regulations promulgated
thereunder.
GENERAL
Section 16(a) Beneficial Ownership
Reporting Compliance
Section 16(a) of the Exchange Act requires our directors and executive
officers, and any persons who beneficially own more than 10% of our stock, to
file with the SEC initial reports of ownership and reports of changes in
ownership of our stock. Such persons are required by SEC regulations to furnish
us with copies of all Section 16(a) forms they file. As a matter of practice,
our administrative staff assists our executive officers and directors in
preparing and filing such reports with the SEC.
To our knowledge, based solely upon a review of filings with the SEC and
written representations that no other reports were required, we believe that all
of our directors and executive officers complied during 2013.
44
Other Information
The expenses of
preparing and mailing this proxy statement and the accompanying proxy card and
the cost of solicitation of proxies, if any, will be borne by us. In addition to
the use of mailings, proxies may be solicited by personal interview and
telephone and by our directors, officers and regular employees without special
compensation therefore. We expect to reimburse banks, brokers and other persons
for their reasonable out-of-pocket expenses in handling proxy materials for
beneficial owners of our common stock.
Unless contrary instructions are indicated on the proxy card, all shares
of common stock represented by valid proxies received pursuant to this
solicitation (and not revoked before they are voted) will be voted in accordance
with the recommendation of the board of directors.
OTHER MATTERS
Our board does not know of any other matters that are to be presented for
action at the 2013 annual meeting. Should any other matter come before the
annual meeting, however, the persons named in the enclosed proxy will have
discretionary authority to vote all proxies with respect to such matter in
accordance with their judgment.
BY ORDER OF THE BOARD OF
DIRECTORS
|
|
|
|
Steven J. Shirar
Senior Vice President and
Secretary
|
Dated: March 26, 2014
45
|
|
CONSOLIDATED
COMMUNICATIONS
HOLDINGS, INC.
|
|
|
|
|
|
IMPORTANT ANNUAL
MEETING INFORMATION
|
|
|
|
|
Using a
black
ink
pen, mark your votes with an
X
as shown in
this
example. Please do not write outside the designated areas.
|
|
x
|
|
Annual Meeting Proxy
Card
|
|
|
6
PLEASE FOLD ALONG THE PERFORATION, DETACH AND
RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.
6
|
A
|
|
Proposals
|
The Board of Directors recommends a vote
FOR
the director
candidates nominated by the Board of
|
|
|
|
Directors,
FOR
Proposal 2, and
FOR
Proposal 3.
|
|
|
|
|
|
1.
|
Election of Directors:
|
For
|
Withhold
|
|
|
For
|
Withhold
|
|
|
For
|
Withhold
|
|
|
|
01 - Robert J. Currey
|
c
|
c
|
|
02 - C. Robert Udell, Jr.
|
c
|
c
|
|
03 - Maribeth S. Rahe
|
c
|
c
|
|
|
|
For
|
Against
|
Abstain
|
|
|
|
|
|
2.
|
Approval of Ernst & Young, LLP, as the independent registered
public accounting firm.
|
c
|
c
|
c
|
|
|
For
|
Against
|
Abstain
|
|
|
|
|
|
3.
|
Executive Compensation - An advisory vote on the approval of
compensation of our named executive officers.
|
c
|
c
|
c
|
B
|
|
Authorized Signatures This section must be completed for your
vote to be counted. Date and Sign Below
|
Please sign exactly as
name(s) appears hereon. Joint owners should each sign. When signing as
attorney, executor, administrator, corporate officer, trustee, guardian,
or custodian, please give full title.
|
Date
(mm/dd/yyyy) Please print date below.
|
|
Signature 1 Please keep signature within the box.
|
|
Signature 2 Please keep signature within the box.
|
/ /
|
|
|
|
|
6
PLEASE FOLD ALONG THE PERFORATION, DETACH AND
RETURN THE BOTTOM PORTION IN THE ENCLOSED
ENVELOPE
.
6
|
Proxy CONSOLIDATED
COMMUNICATIONS HOLDINGS, INC.
|
CONSOLIDATED COMMUNICATIONS
HOLDINGS, INC.
121 SOUTH
17TH STREET, MATTOON, IL 61938
Proxy Solicited by Board of
Directors for Annual Meeting April 29, 2014 at 9:00 a.m. Central
Time
Steven J. Shirar and
Matthew K. Smith, or either of them, each with the power of substitution, are
hereby authorized to represent and vote the shares of the undersigned, with all
the powers which the undersigned would possess if personally present, at the
Annual Meeting of Stockholders of Consolidated Communications Holdings, Inc. to
be held on April 29, 2014 or at any postponement or adjournment
thereof.
Shares represented by
this proxy will be voted by the stockholder. If no such directions are
indicated, the Proxies will have authority to vote
FOR
the director
candidates nominated by the Board of Directors,
FOR
Proposal 2, and
FOR
Proposal 3.
In their discretion, the
Proxies are authorized to vote upon such other business as may properly come
before the meeting.
(Continued and to be voted on
reverse side.)
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CONSOLIDATED
COMMUNICATIONS
HOLDINGS, INC.
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IMPORTANT ANNUAL MEETING
INFORMATION
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Electronic Voting Instructions
Available 24 hours a day, 7 days a
week!
Instead
of mailing your proxy, you may choose one of the voting methods outlined
below to vote your proxy.
VALIDATION DETAILS ARE LOCATED BELOW IN THE TITLE
BAR.
Proxies
submitted by the Internet or telephone must be received by 1:00 a.m.,
Central Time, on April 29, 2014.
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Vote by
Internet
-
Go to
www.envisionreports.com/CNSL
-
Or scan the QR code with your
smartphone
-
Follow the steps outlined on the
secure website
|
Vote by
telephone
-
Call toll free 1-800-652-VOTE (8683)
within the USA, US territories & Canada on a touch tone telephone
-
Follow the instructions provided by
the recorded message
Using a
black ink
pen, mark your votes with an
X
as shown in
this example.
Please do not write outside the designated areas.
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x
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Annual Meeting Proxy
Card
|
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6
IF YOU HAVE NOT VOTED VIA THE INTERNET OR
TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM
PORTION IN THE ENCLOSED ENVELOPE.
6
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A
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Proposals
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The Board of Directors
recommends a vote FOR the director candidates nominated by the Board of
Directors,
FOR
Proposal 2, and
FOR
Proposal 3.
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1.
|
Election of Directors:
|
For
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Withhold
|
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For
|
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Withhold
|
|
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For
|
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Withhold
|
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01 - Robert J. Currey
|
c
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c
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02 - C. Robert Udell, Jr.
|
c
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c
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03 - Maribeth S. Rahe
|
c
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c
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For
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Against
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Abstain
|
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For
|
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Against
|
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Abstain
|
2.
|
Approval of Ernst & Young,
LLP, as the independent registered public accounting firm.
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c
|
|
c
|
|
c
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3.
|
Executive Compensation - An
advisory vote on the approval of compensation of our named executive
officers.
|
|
c
|
|
c
|
|
c
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B
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Non-Voting Items
|
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Change of Address
Please
print your new address below.
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Comments
Please print
your comments below.
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Meeting Attendance
|
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|
Mark the box to the right if you plan to attend the Annual Meeting.
|
c
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C
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Authorized Signatures This section must be completed for your
vote to be counted. Date and Sign Below
|
Please sign exactly as name(s) appears hereon. Joint owners should
each sign. When signing as attorney, executor, administrator, corporate
officer, trustee, guardian, or custodian, please give full
title.
|
Date
(mm/dd/yyyy) Please print date below.
|
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Signature 1 Please keep signature within the box.
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Signature 2 Please keep signature within the box.
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/ /
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6
IF YOU HAVE NOT VOTED VIA THE INTERNET
OR
TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM
PORTION IN THE ENCLOSED ENVELOPE.
6
|
Proxy CONSOLIDATED
COMMUNICATIONS HOLDINGS, INC.
|
CONSOLIDATED COMMUNICATIONS
HOLDINGS, INC.
121 SOUTH 17TH STREET, MATTOON, IL 61938
Proxy Solicited
by Board of Directors for Annual Meeting April 29, 2014 at 9:00 a.m. Central
Time
Steven J.
Shirar and Matthew K. Smith, or either of them, each with the power of
substitution, are hereby authorized to represent and vote the shares of the
undersigned, with all the powers which the undersigned would possess if
personally present, at the Annual Meeting of Stockholders of Consolidated
Communications Holdings, Inc. to be held on April 29, 2014 or at any
postponement or adjournment thereof.
Shares
represented by this proxy will be voted by the stockholder. If no such
directions are indicated, the Proxies will have authority to vote FOR the
director candidates nominated by the Board of Directors,
FOR
Proposal 2, and
FOR
Proposal 3.
In their
discretion, the Proxies are authorized to vote upon such other business as may
properly come before the meeting.
(Continued and to be voted on reverse side.)
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